The Fundamental Determinants of Risk In Banking / Barr Rosenberg, Philip R. Perry.

Format:

Book

Author/Creator:

Rosenberg, Barr.

Contributor:

National Bureau of Economic Research.

Perry, Philip R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0265.

NBER working paper series no. w0265

Language:

English

Subjects (All):

Risk management--Mathematical models.

Risk management.

Bank investments--Mathematical models.

Bank investments.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1978.

Cambridge, Mass. : National Bureau of Economic Research, 1978.

Summary:

This study is concerned with establishing the determinants of banks' exposure to risk and with predicting risk in banking. Using the COMPUSTAT data base, prediction rules have been developed for two aspects of risk: systematic risk (risk that is related to covariance with the market portfolio) and residual risk (the aggregate of specific

risk and extra-market covariance). For each type of risk, several models have bean estimated: one model employs only measures of the asset and liability characteristics of the bank; a second employs these characteristics and other data taken from annual reports; a third model adds the history of the behavior of the price at the bank's common stock. The central conclusion of the study is that systematic and residual risk in banks can be predicted from predetermined data. Prediction rules estimated in this way can serve a useful function in monitoring bank risk. Further, the predictive significance of each variable serves as a measure of the appropriateness of that variable as an indicator of risk, and hence as a target for regulation.

Notes:

Print version record

July 1978.