Estimating the Lerner index for the banking industry: a stochastic frontier approach

Paolo Coccorese

Applied Financial Economics, 2014, vol. 24, issue 2, 73-88

Abstract: In this article we estimate individual banks' Lerner indices for a large group of countries in the years 1994--2012 by means of the econometric method proposed by Kumbhakar et al. (2012), which is based on the stochastic frontier methodology. We then compare our results with those of existing studies on market power in the banking industry, in order to check the general consistency of the empirical evidence and thus provide some appraisal on this novel technique as well as a sketch on the strengths that may advise its use.

Date: 2014
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DOI: 10.1080/09603107.2013.866202

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