Changing Perceptions of Maturity Mismatch in the US Banking System: Evidence from Equity Markets
35 Pages Posted: 25 Apr 2010 Last revised: 29 Jul 2013
Date Written: July 2013
We use the sensitivity of bank holding company equity returns to market interest rates as an indicator of perceived maturity mismatch. Based on data from 1990 to 2009, there is only weak evidence that market participants perceived banks to be effectively short-funded. However, looking at 1990 to 1996 and 1997 to 2009 subsamples separately, our results suggest that U.S. commercial banks were perceived as short-funded during the earlier time period but not the later. During this time of changing perceptions of maturity mismatch, banks were increasing their holdings of real estate loans as a share of total assets. We present evidence that, subsequent to 1996, market participants perceived real estate loans as having become effectively shorter-term.
Keywords: maturity mismatch, effective maturity, commercial banks, mortgages, mortgage-backed securities
JEL Classification: G21, G01, E44, E02
Suggested Citation: Suggested Citation
By Hong Min