Bank failures in banking panics: Risky banks or road kill?

Gerald Dwyer and Rik Hafer (rikhafer@gmail.com)

No 2001-13, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Are banks that fail in banking panics the riskiest ones prior to the panics? The free banking era in the United States provides useful data to examine this question because the assets held by the banks were traded at the New York Stock Exchange. The authors estimate the ex ante riskiness of a bank?s portfolio by examining the portfolio relative to mean-variance frontiers and by examining the bank's leverage and notes relative to assets. The authors find that the ex ante riskiness of a bank?s portfolio helps predict which banks fail and the extent of noteholders? losses in the event of failure.

Keywords: Risk; Debt; Bank supervision; Bank failures (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-acc, nep-cba and nep-pke
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Citations: View citations in EconPapers (4)

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