Are Banks Still a Risk Source for Stock Market? Some Empirical Evidences

Michele Anelli, Michele Patanè and Stefano Zedda
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Michele Anelli: Department of Business and Law, School of Economics and Management, University of Siena, 53100 Siena, Italy
Michele Patanè: Department of Business and Law, School of Economics and Management, University of Siena, 53100 Siena, Italy
Stefano Zedda: Department of Business and Economics, University of Cagliari, 09123 Cagliari, Italy

JRFM, 2022, vol. 15, issue 7, 1-13

Abstract: The global financial crisis of 2008 proved that what initially appeared to be relatively small losses in the financial system can be magnified to systemic ones. The European Union debt crisis has thus revived interest in the interdependence across different markets, especially sovereign debt markets and the banking sector, and in the interlinkages among idiosyncratic and common shocks. This paper analyzes the evolution over time of the incidence of common shocks on the main Italian banking groups starting from the period of European Central Bank’s Quantitative Easing program. Results show that the banking sector is no longer perceived by the markets as a common risk source, overcoming the negative picture coming from the financial crisis of 2008–2009. The analysis also suggests that the common risk is broadly affected by the ECB monetary policy, and the idiosyncratic risk is linked to the recapitalization processes.

Keywords: common shock; idiosyncratic shock; relative strength; VECM; rolling regression (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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