Forecasting Bank Leverage
AbstractStandard early warning models to predict bank failures cannot be estimated during periods of few or zero failures, precluding any updating of such models during times of good performance. Here we address this problem using an alternative approach, forecasting the simple leverage ratio (equity/assets) as a continuous variable that does not suffer from the small sample problem. Out-of-sample performance shows some promise as a supplement to the standard approach, despite measurable deterioration in prediction accuracy during the crisis years.
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Bibliographic InfoPaper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 176.
Length: 34 pages
Date of creation: 01 Dec 2012
Date of revision:
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bank leverage; forecasts; early warning;
Other versions of this item:
- Gerhard Hambusch & Sherrill Shaffer, 2012. "Forecasting Bank Leverage," CAMA Working Papers 2012-56, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Gerhard Hambusch & Sherrill Shaffer, 2012. "Forecasting Bank Leverage," Research Paper Series 320, Quantitative Finance Research Centre, University of Technology, Sydney.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-BAN-2012-12-22 (Banking)
- NEP-CBA-2012-12-22 (Central Banking)
- NEP-FOR-2012-12-22 (Forecasting)
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