Financial intermediary leverage spillovers

Apostolos Serletis and Khandokar Istiak

Research in International Business and Finance, 2017, vol. 39, issue PB, 1000-1007

Abstract: Using quarterly data for the United States (over the period from 1983 to 2014) and state-of-the-art financial econometrics, we explore for spillovers and interactions among the leverage levels of broker-dealers, commercial banks, and shadow banks and their volatilities. The key contribution to the literature is the estimation of a trivariate VARMA, GARCH-in-Mean, BEKK model that allows for the interdependence among the three leverage series and their volatilities. We find that broker-dealers leverage is procyclical, that there are significant spillover ARCH and GARCH effects across financial intermediaries, and that the leverage of broker-dealers is a good predictor of future economic activity.

Keywords: Leverage; Volatility; VARMA; GARCH-in-Mean model (search for similar items in EconPapers)
JEL-codes: C32 C58 E44 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:39:y:2017:i:pb:p:1000-1007

DOI: 10.1016/j.ribaf.2016.03.001

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