EconPapers    
Economics at your fingertips  
 

Common risk factors in bank stocks

Ariel Viale (), James W. Kolari and Donald R. Fraser

Journal of Banking & Finance, 2009, vol. 33, issue 3, 464-472

Abstract: This paper provides evidence on the risk factors that are priced in bank equities. Alternative empirical models with precedent in the nonfinancial asset pricing literature are tested, including the single-factor CAPM, three-factor Fama-French model, and ICAPM. Our empirical results indicate that an unconditional two-factor ICAPM model that includes the stock market excess return and shocks to the slope of the yield curve is useful in explaining the cross-section of bank stock returns. However, we find no evidence that firm specific factors such as size and book-to-market ratios are priced in bank stock returns. These results have a number of important implications for the estimation of the banks' cost of capital as well as regulatory initiatives to utilize market discipline to evaluate bank risk under Basel II.

Keywords: Asset; pricing; Bank; stocks; Regulatory; policy (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(08)00201-X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:3:p:464-472

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-10-17
Handle: RePEc:eee:jbfina:v:33:y:2009:i:3:p:464-472