Forecasting bank failures: timeliness versus number of failures

Guo Li, Lee Sanning and Sherrill Shaffer

Applied Economics Letters, 2011, vol. 18, issue 16, 1549-1552

Abstract: Motivated by the observation that very few banks fail in normal years, we explore the impact of that pattern on the precision of a standard statistical failure model and discuss implications for regulation and risk management. Out-of-sample forecasting is found to be worse for a model fitted to recent data with few failures than for a model fitted to much older data with more failures.

Keywords: bank failure; early warning; rare events (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/13504851.2010.548777

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