Optimal Weights and Stress Banking Indexes
AbstractThe goal of this paper is to provide alternative approaches to generate indexes in order to assess banking distress. Specifically, we focus on two groups of indexes that are based on the signalling approach and on the zero in ated Poisson models. The results show that the indexes based on these approaches perform better than those constructed by using the variance-equal and the factor analysis methods. Specifically, they are better at capturing relevant events, signalling distress episodes and forecasting properties. The importance of this study is two-fold: first, we contribute extra information that can be useful for forecasting banking system soundness in the aim of preventing future financial crises; second we provide alternative methods for measuring banking distress.
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Bibliographic InfoPaper provided by IRENE Institute of Economic Research in its series IRENE Working Papers with number 13-02.
Length: 43 pages
Date of creation: Jan 2013
Date of revision:
Stress-banking indexes; Signalling approach; Limited dependent variable methods;
Find related papers by JEL classification:
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-02-03 (Accounting & Auditing)
- NEP-ALL-2013-02-03 (All new papers)
- NEP-BAN-2013-02-03 (Banking)
- NEP-CBA-2013-02-03 (Central Banking)
- NEP-FOR-2013-02-03 (Forecasting)
- NEP-ORE-2013-02-03 (Operations Research)
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