FRB Atlanta Working Paper No. 2001-13
35 Pages Posted: 24 Aug 2001
Date Written: July 2001
Are banks that fail in banking panics the riskiest ones prior to the panics? The free banking era in the United States provides useful data to examine this question because the assets held by the banks were traded at the New York Stock Exchange. The authors estimate the ex ante riskiness of a bank's portfolio by examining the portfolio relative to mean-variance frontiers and by examining the bank's leverage and notes relative to assets. The authors find that the ex ante riskiness of a bank's portfolio helps predict which banks fail and the extent of noteholders' losses in the event of failure.
Keywords: Banking panics, bank failure, banking regulation, portfolio risk
JEL Classification: G21, G28, E58, N21
Suggested Citation: Suggested Citation
Dwyer, Gerald P. and Hafer, Rik W., Bank Failures in Banking Panics: Risky Banks or Road Kill? (July 2001). FRB Atlanta Working Paper No. 2001-13. Available at SSRN: https://ssrn.com/abstract=281006 or http://dx.doi.org/10.2139/ssrn.281006