Early warning indicators of banking crisis and bank related stock returns

Bumjean Sohn and Heungju Park

Finance Research Letters, 2016, vol. 18, issue C, 193-198

Abstract: This study examines whether early warning indicators of banking crisis can predict the U.S. bank related stock returns in credit tightening periods. We use the credit-to-GDP gap and the credit growth as the early warning indicators of banking crisis. Using bank stock returns and stock returns of bank dependent firms, we find the credit growth forecasts both of the bank related stock returns better than the credit-to-GDP gap in periods of tightened credit conditions. Our results suggest that the credit growth is more informative in predicting bank sector crisis than the credit-to-GDP gap.

Keywords: Credit cycles; Banks; Bank dependent firms; Stock return predictability (search for similar items in EconPapers)
JEL-codes: E32 E44 G12 G21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:193-198

DOI: 10.1016/j.frl.2016.04.016

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