Optimal Weights and Stress Banking Indexes

Stefano Puddu ()

No 13-02, IRENE Working Papers from IRENE Institute of Economic Research

Abstract: The goal of this paper is to provide alternative approaches to generate indexes in order to assess banking distress. Specifically, we focus on two groups of indexes that are based on the signalling approach and on the zero inflated Poisson models. The results show that the indexes based on these approaches perform better than those constructed by using the variance-equal and the factor analysis methods. Specifically, they are better at capturing relevant events, signalling distress episodes and forecasting properties. The importance of this study is two-fold: first, we contribute extra information that can be useful for forecasting banking system soundness in the aim of preventing future financial crises; second we provide alternative methods for measuring banking distress.

Keywords: Stress-banking indexes; Signalling approach; Limited dependent variable methods (search for similar items in EconPapers)
JEL-codes: C16 C25 G21 G33 G34 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2013-01
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cba, nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:irn:wpaper:13-02

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