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Data Lessons on Bank Behavior

Juliane Begenau, Jeremy Majerovitz and Saki Bigio
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Juliane Begenau: Stanford University
Jeremy Majerovitz: Stanford University

No 161, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We investigate the behavior of bank balance sheet's in the United States during 2007-2015. The goal is to deepen the understanding of the behavior of banks. During this period, bank aggregate book-equity losses were entirely offset by equity issuances whereas market-value losses were catastrophic and never recovered. We find evidence that supports a theory where banks target market leverage, but where adjustments to a target are very gradual. We also find that, in contrast to the pre-crisis period, during the post-crisis banks relied more on retained earnings rather than on assets sales to adjust to a market leverage target. We present a heterogeneous-bank model that rationalizes these facts and can serve as a building block for future work.

Date: 2018
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:161

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More papers in 2018 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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