On mean–variance analysis of a bank’s behavior

Kazuhiro Takino and Yoshikazu Ishinagi

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: We consider the mean–variance utility maximization problem for banks. In particular, we consider the utility maximization problems of the portfolio return and accounting profit. Moreover, we consider balance sheet models for both conditions irrespective of whether the items on the liability side are internalized in terms of assets. The calibration result shows that there is no significant difference in the accuracies of the fit of the utility maximization models for the portfolio return and accounting profit as long as the balance sheet is internalized. Therefore, internalization of the balance sheet model is important to describe the bank’s behavior.

Keywords: Bank’s behavior; Bank’s asset allocation; Mean–variance analysis (search for similar items in EconPapers)
JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003263

DOI: 10.1016/j.frl.2021.102292

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