Bank Holdings and Systemic Risk
Jeffrey Harris () and
No 2018-063, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)
The recent financial crisis has focused attention on identifying and measuring systemic risk. In this paper, we propose a novel approach to estimate the portfolio composition of banks as function of daily interbank trades and stock returns. While banks’ assets are reported to regulators and/or the public at relatively low frequencies (e.g. quarterly or annually), our approach estimates bank asset holdings at higher frequencies which allows us to derive precise estimates of (i) portfolio concentration within each bank—a measure of diversification—and (ii) common holdings across banks—a measure of market susceptibility to propagating shocks. We find evidence that systemic risk measures derived from our approach lead, in a forecasting sense, several commonly used systemic risk indicators.
Keywords: Systemic risk; Concentration index; Bank holdings; Similarity index (search for similar items in EconPapers)
JEL-codes: G21 C11 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-63
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