Journal ArticleDOI
Size Anomalies in U.S. Bank Stock Returns
TLDR
In this paper, the authors 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.Abstract:
The largest commercial bank stocks, ranked by the 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 the existence of government guarantees that protect shareholders of large banks, but not small banks, in disaster states.read more
Citations
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Journal ArticleDOI
Variable Rare Disasters: An Exactly Solved Framework for Ten Puzzles in Macro-Finance
TL;DR: In this article, the authors incorporate a time-varying intensity of disasters in the Rietz-Barro hypothesis that risk premia result from the possibility of rare, large disasters.
Journal ArticleDOI
This Time Is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis
TL;DR: This paper investigated whether a bank's performance during the 1998 crisis, which was viewed at the time as the most dramatic crisis since the Great Depression, predicts its performance in the recent financial crisis.
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Do we need big banks ? evidence on performance, strategy and market discipline
Journal ArticleDOI
Corporate bond default risk: A 150-year perspective
TL;DR: This paper examined the extent to which default rates can be forecast by financial and macroeconomic variables, finding that stock returns, stock return volatility, and changes in GDP are strong predictors of default rates.
Posted Content
Dissecting Characteristics Nonparametrically
TL;DR: The authors proposed a nonparametric method to test which characteristics provide independent information for the cross-section of expected returns, and used the adaptive group LASSO to select characteristics and to estimate how they affect expected returns nonparametrically.
References
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Journal ArticleDOI
Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI
Bank Runs, Deposit Insurance, and Liquidity
TL;DR: The authors showed that bank deposit contracts can provide allocations superior to those of exchange markets, offering an explanation of how banks subject to runs can attract deposits, and showed that there are circumstances when government provision of deposit insurance can produce superior contracts.
Journal ArticleDOI
Multifactor Explanations of Asset Pricing Anomalies
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors show that many of the CAPM average-return anomalies are related, and they are captured by the three-factor model in Fama and French (FF 1993).
Journal ArticleDOI
The relationship between return and market value of common stocks
TL;DR: Scholes et al. as discussed by the authors examined the relationship between the total market value of the common stock of a firm and its return and found that small firms had higher risk adjusted returns than large firms.
Posted Content
Contrarian Investment, Extrapolation, and Risk
TL;DR: In this paper, the authors provide evidence that value strategies yield higher returns because these strategies exploit the mistakes of the typical investor, and not because these riskier strategies are fundamentally riskier.
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