Bank diversification: laws and fallacies of large numbers
AbstractConventional wisdom on bank diversification confuses risk with failure. This article clarifies the distinction and shows how increasing bank size may increase bank risk, even though it lessens the probability of failure and lowers the expected loss. The key result is an application of Samuelson's "fallacy of large numbers."
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Bibliographic InfoArticle provided by Federal Reserve Bank of Cleveland in its journal Economic Review.
Volume (Year): (1998)
Issue (Month): Q II ()
Other versions of this item:
- Joseph G. Haubrich, 1994. "Bank diversification: laws and fallacies of large numbers," Working Paper 9417, Federal Reserve Bank of Cleveland.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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