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What determines bank stock price synchronicity? Global evidence

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Author Info

  • Francis , Bill

    (Rensselaer Polytechnic Institute)

  • Hasan, Iftekhar

    ()
    (Fordham University and Bank of Finland)

  • Song, Liang

    (Michigan Technological University)

  • Yeung , Bernard

    (National University of Singapore)

Abstract

This paper examines what institutional and bank-specific factors determine bank stock price synchronicity. Using data on 37 countries from 1996–2007, we find that bank stocks are more aligned with the whole market (1) during the financial crisis; (2) in countries that have more credit provided by banks; (3) in countries that do not have explicit depository insurance; and (4) in countries that have lower bank-level disclosure. The results hold for both emerging and developed economy subsamples. Furthermore, in emerging economies, bank stocks in countries with higher degree of state-owned bank are more synchronized with the whole market, similarly, in developed markets, lower banking freedom enhances bank stock price synchronicity. Finally, the effects of state ownership, protection of property rights, and bank size are all more pronounced when determining bank stock price synchronicity during the financial crisis period.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/BoF_DP_1216.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 16/2012.

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Length: 46 pages
Date of creation: 18 Apr 2012
Date of revision:
Handle: RePEc:hhs:bofrdp:2012_016

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: stock price synchronicity; financial crisis; bank ownership; deposit insurance; banking freedom; bank disclosure;

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References

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Cited by:
  1. Bozos, Konstantinos & Koutmos, Dimitrios & Song, Wei, 2013. "Beta risk and price synchronicity of bank acquirers’ common stock following merger announcements," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 47-58.

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