Commercial Bank Exposure and Sensitivity to the Real Estate Market
In this study, we assess the balance sheet exposure of commercial banks to the real estate market, and develop a hypothesis on the potential systematic effects of real estate conditions across banks. By applying a seemingly unrelated regression (SUR) model to bank portfolios, we test for the relation between bank values and a real estate market proxy after controlling for general market and interest-rate conditions. We find a positive relationship between monthly bank returns and the real estate index, even after accounting for general market and interest-rate movements. The sensitivity of bank values to the real estate market has increased over time, and the bank-specific sensitivity coefficient is positively related to the bank's balance sheet exposure to real estate.
Volume (Year): 10 (1995)
Issue (Month): 2 ()
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