Commercial Bank Exposure and Sensitivity to the Real Estate Market

Marcus T. Allen (), Jeff Madura () and Kenneth J. Wiant
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Marcus T. Allen: College of Business Florida Atlantic University University Tower 220 S.E. 2nd Avenue Fort Lauderdale, Florida 33301, http://www.collegeofbusiness.fau.edu/
Jeff Madura: College of Business Florida Atlantic University University Tower 220 S.E. 2nd Avenue Fort Lauderdale, Florida 33301, http://www.collegeofbusiness.fau.edu/
Kenneth J. Wiant: College of Business Florida Atlantic University University Tower 220 S.E. 2nd Avenue Fort Lauderdale, Florida 33301, http://www.collegeofbusiness.fau.edu/

Journal of Real Estate Research, 1995, vol. 10, issue 2, pages 129-140

Abstract: In this study, we assess the balance sheet exposure of commercial banks to the real estate market, and develop a hypothesis on the potential systematic effects of real estate conditions across banks. By applying a seemingly unrelated regression (SUR) model to bank portfolios, we test for the relation between bank values and a real estate market proxy after controlling for general market and interest-rate conditions. We find a positive relationship between monthly bank returns and the real estate index, even after accounting for general market and interest-rate movements. The sensitivity of bank values to the real estate market has increased over time, and the bank-specific sensitivity coefficient is positively related to the bank's balance sheet exposure to real estate.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1995
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