Bank exposure to market fear Public Deposited

http://ir.library.oregonstate.edu/concern/articles/dj52w669z

This is an author's peer-reviewed final manuscript, as accepted by the publisher. The published article is copyrighted by Elsevier and can be found at:  http://www.journals.elsevier.com/journal-of-financial-stability/.

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  • We find that increases in implied market volatility (a proxy for market fear) have a significant impact on returns of bank stocks, above and beyond systematic risk proxied by the expected excess market return during a bad economic regime. Large bank returns are favorably affected by increases in implied market volatility during the crisis, while small banks are adversely affected by increases in implied market volatility. We attribute the different effects among the size-categorized bank portfolios to the perception that large banks are protected by too-big-to-fail policies. Within the sample of small banks, the adverse share price response to increased implied market volatility is more pronounced for banks that rely more heavily on non-traditional sources of funds, use a high proportion of loans in their assets, have a higher level of non-performing assets, and have a relatively low provision for loan losses. The adverse effect of negative innovations in implied market volatility on small bank returns during the crisis is primarily driven by exposure of their loan portfolio to weak economic conditions.
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  • Chira, I., Madura, J., & Viale, A. (2013). Bank exposure to market fear. Journal of Financial Stability, 9(4), 451-459. doi:10.1016/j.jfs.2013.06.004
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  • description.provenance : Submitted by Deanne Bruner (deanne.bruner@oregonstate.edu) on 2014-03-26T23:42:06Z No. of bitstreams: 1 ChiraIngaBusinessBankExposureMarket.pdf: 544492 bytes, checksum: 7df33c5cc290f539af87b6c1f8b22c71 (MD5)
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  • description.provenance : Made available in DSpace on 2014-03-26T23:43:56Z (GMT). No. of bitstreams: 1 ChiraIngaBusinessBankExposureMarket.pdf: 544492 bytes, checksum: 7df33c5cc290f539af87b6c1f8b22c71 (MD5) Previous issue date: 2013-12

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