This dissertation provides evidence on the risk factors that are priced in bank
equities. Alternative empirical models with precedent in the nonfinancial asset pricing
literature are tested, including the single-factor Capital Asset Pricing Model (CAPM),
three-factor Fama-French model, and Intertemporal Capital Asset Pricing Model
(ICAPM).
The empirical results indicate that an unconditional two-factor Intertemporal
Capital Asset Pricing Model (ICAPM) model, that includes the stock market excess
return and shocks to the slope of the yield curve, is useful in explaining the cross-section
of bank stock returns. I find no evidence, however, that firm specific factors, such as size
and book-to-market ratios, are priced in bank stock returns. These results have a number
of practical implications for event studies of banking firms, estimation of bank cost of
capital and investment performance, as well as regulatory initiatives to utilize market
discipline to evaluate bank risk under Basel II.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/5806 |
| Date | 17 September 2007 |
| Creators | Viale, Ariel Marcelo |
| Contributors | Kolari, James |
| Publisher | Texas A&M University |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Dissertation, text |
| Format | 383726 bytes, electronic, application/pdf, born digital |
Page generated in 0.0019 seconds