Size Anomalies in U.S. Bank Stock Returns: A Fiscal Explanation / Priyank Gandhi, Hanno Lustig.

Format:

Book

Author/Creator:

Gandhi, Priyank.

Contributor:

National Bureau of Economic Research.

Lustig, Hanno.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16553.

NBER working paper series no. w16553

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Size Anomalies in U.S. Bank Stock Returns

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

The largest commercial bank stocks, ranked by total size of the balance sheet, have significantly lower risk-adjusted returns than small- and medium-sized bank stocks, even though large banks are significantly more levered. We uncover a size factor in the component of bank returns that is orthogonal to the standard risk factors, including small-minus-big, which has the right covariance with bank returns to explain the average risk-adjusted returns. This factor measures size-dependent exposure to bank-specific tail risk. These findings are consistent with government guarantees that protect shareholders of large banks, but not small banks, in disaster states.

Notes:

Print version record

November 2010.