Is there a too-big-to-fail discount in excess returns on German banks' stocks?

Thomas Nitschka

No 2015-08, Working Papers from Swiss National Bank

Abstract: This paper shows that standard multifactor asset pricing models provide an adequate description of excess returns on stock indexes of German industrial sectors. The only exception is the banking sector index. It offers lower monthly excess returns than suggested by exposures to risk factors in the sample period from 1973 to 2014. This evidence is robust to various changes in the specification of the empirical model. Rolling time window regressions highlight that this finding has been most pronounced since the peak of the global financial crisis in 2008/2009 when the government guarantee for big, systemically important German banks became explicit.

Keywords: banking sector; multifactor models; risk factors; risk premia (search for similar items in EconPapers)
JEL-codes: G10 G21 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2015
New Economics Papers: this item is included in nep-fmk
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Journal Article: Is There a Too-Big-to-Fail Discount in Excess Returns on German Banks’ Stocks? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2015-08

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