Does bank capitalization matter for bank stock returns?

Qiubin Huang*, Jakob Haan, de, Bert Scholtens

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

We examine US bank capitalization and its association with bank stock returns, and find that the book- and market-based capital ratios show different patterns. Fama-MacBeth regressions and portfolio analyses suggest that banks' market-based capital ratios are negatively associated with banks' stock returns during the (tranquil) 1994-2007 period while book-based capital ratios are positively associated with banks' stock returns during the (turbulent) 2008-2014 period. These results suggest that the effect of bank capitalization on bank stock returns depends on the capital measure used and the period considered.

Original languageEnglish
Article number101171
Number of pages23
JournalNorth American Journal of Economics and Finance
Volume52
DOIs
Publication statusPublished - Apr-2020

Keywords

  • Bank capitalization
  • Bank stock returns
  • Portfolio analysis
  • Fama-MacBeth regression
  • COMMON RISK-FACTORS
  • GOOD TIMES
  • REQUIREMENTS
  • PERFORMANCE
  • HETEROSKEDASTICITY
  • EQUILIBRIUM
  • EXPOSURES
  • IMPACT
  • CRISES
  • FLIGHT

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