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Market evidence on the opaqueness of banking firms' assets

  • Simon H. Kwan
  • Mark J. Flannery
  • M. Nimalendran

We assess the market microstructure properties of U.S. banking firms' equity, to determine whether they exhibit more or less evidence of asset opaqueness than similar-sized nonbanking firms. The evidence strongly indicates that large banks (traded on NASDAQ) trade much less frequently despite microstructure characteristics. Problem (noncurrent) loans tend to raise the frequency with which the bank's equity trades, as well as the equity's return volatility. The implications for regulatory policy and future market microstructure research are discussed.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Papers in Applied Economic Theory with number 99-11.

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Date of creation: 1999
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Publication status: Published in Journal of Financial Economics, March 2004, v. 71, iss. 3, pp. 419-60
Handle: RePEc:fip:fedfap:99-11
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