Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.13/919847

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Title
Predicting bank failures using a simple dynamic hazard model
Author/Creator
Cole, Rebel A.;  Wu, Qiongbing
Institution
The University of Newcastle. Faculty of Business & Law, Newcastle Business School
Description
We use a simple dynamic hazard model with time-varying covariates to develop a bankfailure early warning model, and then test the out-of-sample forecasting accuracy of this model relative to a simple one-period Probit model, such as is used by U.S. banking regulators. By incorporating time-varying covariates, our model enables us to utilize macroeconomic variables, which cannot be incorporated into in a one-period model. We find that our model significantly outperforms the simple Probit model with and without the macroeconomic variables. The improvement in accuracy comes from the time-varying bank-specific variables. [Finalised 2010 title: 'Is hazard or probit more accuarate in predicting financial distress? : evidence from U.S. bank failures']
Relation
22nd Australasian Finance and Banking Conference 2009 (AFBC 2009). Proceedings of the 22nd Australasian Finance and Banking Conference 2009 (Sydney 16-18 December, 2009)
Relation
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1460526
Date
2009
Publisher
Social Science Electronic Publishing
Keyword(s)
banks;  bank failures;  early warning systems;  failure prediction;  forecasting;  hazard models;  time-varying covariates
Resource Type
conference paper
Identifier
http://hdl.handle.net/1959.13/919847
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"Predicting bank failures using a simple dynamic hazard model"
 
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