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The Asymmetric Impact of Portfolio Mix on Bank Performance over the Business Cycle: U.S. and Canadian Evidence

Author

Listed:
  • Christian Calm¨¨s

    (D¨¦partement des sciences administratives, University du Qu¨¦bec (Outaouais), CANADA)

  • Raymond Th¨¦oret

    (D¨¦partement de finance, Universit¨¦ du Qu¨¦bec (Montr¨¦al), CANADA)

Abstract

We analyze the dynamic linkage between fee-based income and bank performance linkage in the aftermath of the crisis. Surprisingly, our time series approach suggests that the share of fee-based income keeps contributing substantially to bank return on assets (ROA) and risk-adjusted ROA after the crisis. More precisely, our multivariate GARCH framework suggests that the comovements between ROA and fee-based income return are asymmetric¡ªi.e., crucially depend on the phase of the business cycle.

Suggested Citation

  • Christian Calm¨¨s & Raymond Th¨¦oret, 2016. "The Asymmetric Impact of Portfolio Mix on Bank Performance over the Business Cycle: U.S. and Canadian Evidence," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 57-74, February.
    • Handle: RePEc:bap:journl:160205
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    More about this item

    Keywords

    Bank; Diversification; Business cycles; Multivariate GARCH; GMM;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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