Loading...
Model uncertainty and systematic risk in US banking
Baele,L.T.M. De Bruyckere,Valerie De Jonghe,O.G. Vander Vennet,Rudi
Baele,L.T.M.
De Bruyckere,Valerie
De Jonghe,O.G.
Vander Vennet,Rudi
Abstract
This paper uses Bayesian Model Averaging to examine the driving factors of equity returns of US Bank Holding Companies. BMA has as an advantage over OLS that it accounts for the considerable uncertainty about the correct set (model) of bank risk factors. We find that out of a broad set of 12 risk factors only the market, real estate, and high-minus-low Fama–French factors are reliably related to US bank stock returns over the period 1986–2010. Other factors are either only relevant over specific subperiods or for subsets of bank holding companies. We discuss the implications of our findings for empirical banking research.
Description
Date
2015-04
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Bayesian model average, bank risk, systematic risk, bank stock returns, bank supervision, fi nancial stability, G01 - Financial Crises, G20 - General, G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages, G28 - Government Policy and Regulation, SDG 10 - Reduced Inequalities
Citation
Baele, L T M, De Bruyckere, V, De Jonghe, O G & Vander Vennet, R 2015, 'Model uncertainty and systematic risk in US banking', Journal of Banking & Finance, vol. 53, pp. 49-66. https://doi.org/10.1016/j.jbankfin.2014.11.012
License
info:eu-repo/semantics/openAccess