Bank insolvency risk and time-varying Z-score measures

Laetitia Lepetit and Frank Strobel

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Abstract: We compare the di¤erent existing approaches to the construction of time-varying Z-score measures, plus an additional alternative one, using a panel of banks for the G20 group of countries covering the period 1992–2009. We examine which ways of estimating the moments used in these di¤erent ap-proaches best …t the data, using a simple root mean squared error criterion. Our results are supportive of our alternative time-varying Z-score measure: it uses mean and standard deviation estimates of the return on assets cal-culated over full samples combined with current values of the capital-asset ratio, and is thus straightforward to implement.

Keywords: insolvency risk; Z-score; time-varying; mean squared error (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-01098721v1
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Citations: View citations in EconPapers (119)

Published in Journal of International Financial Markets, Institutions and Money, 2013, 25, pp.73 - 87. ⟨10.1016/j.intfin.2013.01.004⟩

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Journal Article: Bank insolvency risk and time-varying Z-score measures (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01098721

DOI: 10.1016/j.intfin.2013.01.004

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