Bank Holdings and Systemic Risk

54 Pages Posted: 4 Aug 2018

See all articles by Celso Brunetti

Celso Brunetti

Board of Governors of the Federal Reserve System

Jeffrey H. Harris

American University - Department of Finance and Real Estate

Shawn Mankad

Cornell University

Multiple version iconThere are 2 versions of this paper

Date Written: July 23, 2018

Abstract

The recent financial crisis has focused attention on identifying and measuring systemic risk. In this paper, we propose a novel approach to estimate the portfolio composition of banks as function of daily interbank trades and stock returns. While banks’ assets are reported to regulators and/or the public at relatively low frequencies (e.g. quarterly or annually), our approach estimates bank asset holdings at higher frequencies which allows us to derive precise estimates of (i) portfolio concentration within each bank — a measure of diversification — and (ii) common holdings across banks — a measure of market susceptibility to propagating shocks. We find evidence that systemic risk measures derived from our approach lead, in a forecasting sense, several commonly used systemic risk indicators.

Keywords: Bank Holdings, Concentration Index, Similarity Index, Systemic Risk

JEL Classification: G21, C110, G110

Suggested Citation

Brunetti, Celso and Harris, Jeffrey H. and Mankad, Shawn, Bank Holdings and Systemic Risk (July 23, 2018). Available at SSRN: https://ssrn.com/abstract=3218365 or http://dx.doi.org/10.2139/ssrn.3218365

Celso Brunetti

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jeffrey H. Harris

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-6669 (Phone)

Shawn Mankad (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States
6072559594 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
66
rank
259,369
Abstract Views
283
PlumX Metrics