Forecasting Bank Leverage

Gerhard Hambusch () and Sherrill Shaffer

No 320, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: Standard early warning models to predict bank failures cannot be estimated during periods of few or zero failures, precluding any updating of such models during times of good performance. Here we address this problem using an alternative approach, forecasting the simple leverage ratio (equity/assets) as a continuous variable that does not suffer from the small sample problem. Out-of-sample performance shows some promise as a supplement to the standard approach, despite measurable deterioration in prediction accuracy during the crisis years.

Keywords: bank leverage; forecasts; early warning (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://www.uts.edu.au/sites/default/files/qfr-archive-03/QFR-rp320.pdf (application/pdf)

Related works:
Working Paper: Forecasting Bank Leverage (2012)
Working Paper: Forecasting Bank Leverage (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:320

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