Financial crises and the asymmetric relation between returns on banks, risk factors and other industry returns

Kenneth Högholm, Johan Knif, Gregory Koutmos*, Seppo Pynnönen

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We show that the relations between the returns on the banking industry, risk factors, and other industries often are asymmetric. Lagged banking industry returns seem to improve predictability but the positive impact of a 1‐month lag of the return on the banking portfolio is much higher in the lower part of the return distribution. However, after the Dodd‐Frank Act in 2010, the cross‐autocorrelation with banks is changed and becomes negative in the upper part of the distribution. Returns on banks also seem to lead returns on five risk factors. This relation, however, is not robust across the distribution.
Original languageEnglish
Peer-reviewed scientific journalThe Financial Review
ISSN0732-8516
DOIs
Publication statusPublished - 07.10.2019
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • banking industry
  • Dodd-Frank Act
  • financial crises

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