- Title
- Predicting bank failures using a simple dynamic hazard model
- Creator
- Cole, Rebel A.; Wu, Qiongbing
- 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
- Publisher
- Social Science Electronic Publishing
- Resource Type
- conference paper
- Date
- 2009
- 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']
- Subject
- banks; bank failures; early warning systems; failure prediction; forecasting; hazard models; time-varying covariates
- Identifier
- uon:9003
- Identifier
- http://hdl.handle.net/1959.13/919847
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