Bank holding company stock risk and the composition of bank asset portfolios
In this paper, I conduct an empirical analysis of the behavior of bank holding company stock returns with the goal of identifying the effect of portfolio composition on the risks embodied in those returns. Using a modified arbitrage pricing theory model, I test for significant balance sheet effects on both the market and nonmarket components of bank stock systematic risk. I find that several categories of bank assets are significant in explaining bank stock risk profiles. Among other things, I discuss the importance of these findings in light of the risk-based capital standards and suggest that noncredit types of risk may need to be incorporated into bank capital standards if capital levels are to reflect risk accurately.
Volume (Year): (1992)
Issue (Month): ()
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- Edward J. Kane & Haluk Unal, 1988. "Change in Market Assessments of Deposit-Institution Riskiness," NBER Working Papers 2530, National Bureau of Economic Research, Inc.
- Jonathan A. Neuberger, 1991. "Risk and return in banking: evidence from bank stock returns," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 18-30.
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