Download This PaperIs There a Banking Risk Premium in the US Stock Market?
25 Pages Posted: 18 Jul 2010
Date Written: July 18, 2010
Abstract
This paper investigates whether there is a banking risk premium that helps explain the returns of US publicly listed firms. We assess this phenomenon in the context of the capital asset pricing model and the Fama and French three-factor model. We use bank size to create the banking factor – a mimicking portfolio that is long (short) big (small) banks. Our findings support a risk-based interpretation of the banking factor and that a banking risk premium is priced and systematic.
Keywords: Asset Pricing, Banking Risk Factor, Mimicking Portfolio, Bank Size
JEL Classification: G12, G21
Suggested Citation: Suggested Citation
Zeng, Liujing and Au Yong, Hue Hwa and Treepongkaruna, Sirimon and Faff, Robert W., Is There a Banking Risk Premium in the US Stock Market? (July 18, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1644865 or http://dx.doi.org/10.2139/ssrn.1644865
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