The association between financial market volatility and banking market structure

Jeremy Crimmel and Elyas Elyasiani

The Quarterly Review of Economics and Finance, 2021, vol. 82, issue C, 335-349

Abstract: We investigate whether banking market structure is associated with financial market volatility. A difficulty with achieving this task is the low frequency of the market structure data relative to the high frequency of volatility data. To overcome this problem, we employ a GARCH-MIDAS model that relates data with dissimilar frequencies. We employ both banking concentration and bank competition as measures of market structure. We find evidence that greater banking concentration is positively associated with higher volatility in the US stock, corporate bond, and Treasury markets, but no evidence of an association between banking competition and financial market volatility.

Keywords: Banking concentration; Bank competition; Financial market volatility; GARCH-MIDAS (search for similar items in EconPapers)
JEL-codes: G10 G21 G34 L10 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:82:y:2021:i:c:p:335-349

DOI: 10.1016/j.qref.2021.09.012

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