Bank stocks, risk factors, and tail behavior

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

  • Huan Yang
  • Jun Cai
  • Lin Huang
  • Alan J. Marcus

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)203-229
Journal / PublicationJournal of Empirical Finance
Volume63
Online published17 Jul 2021
Publication statusPublished - Sep 2021

Abstract

We examine how the tail behavior of risk factors affects the tail behavior of individual bank stock returns in the United States. Using 26 common risk factors, we construct univariate and multivariate conditional exceedance measures. We find that returns on banking industry, security-trading industry, and broad market portfolios have the largest impact on the probability of observing high positive tail returns on bank stocks. A small-minus-big bank return factor, market volatility, and a profitability risk factor have the largest impacts on the probability of lower tail returns. Bank capital ratios and total allowances for loan losses are notably related to tail risk.

Research Area(s)

  • Bank stocks, Loan loss provisions, Risk factors, Upper and lower tail risks

Citation Format(s)

Bank stocks, risk factors, and tail behavior. / Yang, Huan; Cai, Jun; Huang, Lin; Marcus, Alan J.

In: Journal of Empirical Finance, Vol. 63, 09.2021, p. 203-229.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review