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Are Banks Risk-Averse?

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  • Yasuo Nishiyama

    ()

    ({ennsylvania State University - Hazleton)

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    Abstract

    The paper investigates, and estimates, banks’ risk aversion that is factored into the spread between the interest rate on time deposits and the interest rate on non-time deposits. The estimation results indicate that the relative risk aversion coefficient estimates of individual banks fall between 0 and 1, but mostly around 0.2, thereby indicating that banks are risk-averse but close to being risk-neutral.

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume33/V33N4P471_490.pdf
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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 33 (2007)
    Issue (Month): 4 (Fall)
    Pages: 471-490

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    Handle: RePEc:eej:eeconj:v:33:y:2007:i:4:p:471-490
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    Keywords: Banks; Risk Aversion; Deposit Rate Rigidity;

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    1. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
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    14. Ranguelova, Elena & Feldstein, Martin, 2001. "Individual Risk in an Investment-Based Social Security System," Scholarly Articles 2797440, Harvard University Department of Economics.
    15. Stephen A. Rhoades, 1992. "Evidence on the size of banking markets from mortgage loan rates in twenty cities," Staff Studies 162, Board of Governors of the Federal Reserve System (U.S.).
    16. David M. Wright & James V. Houpt, 1996. "An analysis of commercial bank exposure to interest rate risk," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 115-128.
    17. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-26, February.
    18. Niehans, Jurg & Hewson, John, 1976. "The Eurodollar Market and Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 8(1), pages 1-27, February.
    19. Erik Heitfield & Robin A. Prager, 2002. "The geographic scope of retail deposit markets," Finance and Economics Discussion Series 2002-49, Board of Governors of the Federal Reserve System (U.S.).
    20. Lawrence J. Radecki, 1998. "The expanding geographic reach of retail banking markets," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 15-34.
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    Cited by:

    1. Robert A. Ritz & Ansgar Walther, 2014. "How do banks respond to increased funding uncertainty?," Cambridge Working Papers in Economics 1414, Faculty of Economics, University of Cambridge.
    2. Yasuo Nishiyama, 2006. "The Asian Financial Crisis and Investors’ Risk Aversion," Asia-Pacific Financial Markets, Springer, vol. 13(3), pages 181-205, September.
    3. Grodecka, Anna, 2016. "Subprime Borrowers, Securitization and the Transmission of Business Cycles," Working Paper Series 317, Sveriges Riksbank (Central Bank of Sweden).
    4. Ritz, R. A., 2012. "How do banks respond to increased funding uncertainty?," Cambridge Working Papers in Economics 1213, Faculty of Economics, University of Cambridge.

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