The Sensitivity of Bank Stocks to Mortgage Portfolio Composition

Ling T. He, F.C. Neil Myer () and James R. Webb ()
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Ling T. He: Department of Economics & Finance Christopher Newport University Newport News, Virginia 23606, http://www.cnu.edu/econ/index.html
F.C. Neil Myer: Department of Finance James J. Nance College of Business Administration Cleveland State University Cleveland, Ohio 44115, http://www.csuohio.edu/finance_department/index.htm
James R. Webb: Department of Finance James J. Nance College of Business Administration Cleveland State University Cleveland, Ohio 44115, http://www.csuohio.edu/finance_department/index.htm

Journal of Real Estate Research, 1997, vol. 13, issue 1, pages 17-32

Abstract: Previous studies have found that bank stock returns are very sensitive to changes in real estate returns in general. But how the composition and quality of bank real estate portfolios affect the sensitivity of bank stocks to real estate returns has not been rigorously examined. The purpose of this study is to empirically examine this important question. The results indicate that commercial mortgages contribute the most to the sensitivity of bank stock returns. Farmland loans have a negative impact on bank real estate return sensitivity. Thus, farmland loans could play a diversification role in terms of reducing the sensitivity of banks to real estate returns, if used appropriately.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1997
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