- Title
- Banking industry volatility and banking crises
- Creator
- Moshirian, Fariborz; Wu, Qiongbing
- Relation
- Journal of International Financial Markets, Institutions and Money Vol. 19, Issue 2, p. 351-370
- Publisher Link
- http://dx.doi.org/10.1016/j.intfin.2008.02.002
- Publisher
- Elsevier
- Resource Type
- journal article
- Date
- 2009
- Description
- While studies using balance sheet information of banks and macroeconomic indicators to forecast banking crises are prolific, empirical research using market information of banks is relatively sparse. We investigate whether banking industry volatility, constructed with the disaggregated approach from Campbell et al. [Campbell, J.Y., Lettau, M., Malkiel, B.G., Xu, Y., 2001. Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk? The Journal of Finance 56, 1–43] using exclusively publicly available market information of banks, is a good predictor of systemic banking crises in the analyses including data from 18 developed and 18 emerging markets. We find that banking industry volatility performs well in predicting systemic banking crises for developed markets but very poor for emerging markets, which suggest that the impact of market forces on the soundness of the banking system might be different for developed and emerging markets. We also find that those macroeconomic and banking risk management indicators have different impact on the probability of banking crises. Therefore, the traditional cross-country results of the studies on banking crises need to be interpreted cautiously.
- Subject
- banking crises; volatility; market forces
- Identifier
- http://hdl.handle.net/1959.13/806505
- Identifier
- uon:7133
- Identifier
- ISSN:1042-4431
- Language
- eng
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