Financial Policy After the Crisis

Danı́elsson, Jón

doi:10.1007/978-3-030-12395-6_14

Cited by 5 publications

(3 citation statements)

References 2 publications

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“…In our opinion, these outcomes reflect the different nature of the COVID‐19 recession. According to Danielsson et al (2020), the outbreak of COVID‐19 was a purely exogenous shock to the global financial system, while the causes of the GFC were endogenous to the system. This difference could be mainly attributed to the weakness of the financial industry, for example, its poorly risk‐assessed structured credit products, extreme maturity mismatches, inefficient bank capital regulation, and large off‐balance‐sheet liabilities.…”

Section: Resultsmentioning

confidence: 99%

On the time‐varying relationship between coskewness and returns of banks

Bressan

Weissensteiner

2023

Rev Financ Econ

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For a sample of US commercial banks, we find that during the Global Financial Crisis of 2007–2009 and the COVID‐19 pandemic of February–December 2020, bank returns were positively related to their coskewness with the market return, while the relationship was negative during stable periods. The literature on non‐financial firms and global equity indices has shown that the relationship between coskewness and stock returns is time‐variant. The findings of this study extend that evidence to banks. The interpretation is that in normal times, investors show a preference for “lotteryness,” and therefore they are willing to pay a premium for bank stocks with a high coskewness (i.e., low expected return). In contrast, during crises, stocks with a high coskewness are more likely to suffer deep losses, and investors are reluctant to demand these risky high returns. These findings deliver important insights into how to interpret bank capital costs throughout the business cycle, as we suggest that during crises the issuance of equity capital becomes more costly for banks because investors demand higher coskewness risk premiums.

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Section: Resultsmentioning

confidence: 99%

On the time‐varying relationship between coskewness and returns of banks

Bressan

Weissensteiner

2023

Rev Financ Econ

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“…The former, as its name suggests, comes from outside, affecting agents within the system without being influenced by them. ‘Endogenous risk, on the other hand, is created by the interaction of economic agents, all with their own agendas, abilities, resources and biases’ (Danielsson 2019 , p. 258).…”

Section: Discussionmentioning

confidence: 99%

Choosing the Narrative: the Shadow Banking Crisis in Light of Covid

Miller

2021

Open Econ Rev

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Could experiencing a health pandemic aid in understanding the nature of financial crisis? It might, for example, help to discriminate between different narratives that claim to do so. In this spirit, two influential accounts of the near-collapse of shadow banking in the US financial crisis of 2008 are analysed: one developed by Mark Gertler and Nobuhiro Kiyotaki and the other presented by the Financial Crisis Inquiry Commission of the US Congress. Using a common two-sector framework, key features of these contrasting accounts of the market for banking services are presented, along with their corresponding diagnoses of what precipitated financial crisis. To see what the experience of Covid might imply about their relative credibility, four aspects of the current pandemic are considered: how it began from a small biological shock; how it gets spread by contagion; the significance of externalities; and how it may end with a vaccine. But the reader is left to form his or her own judgement.

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“…That is the positive correlation between the economic cycle and the lending activity of banks. As a result, banks have excessive capital during the expansion, while they have a shortfall during contraction (Daníelsson (2019)). The changes from IFRS 9 are expected to address these concerns, and to increase financial stability, for which only broad definitions exist (Gadanecz and Jayaram (2009); Hakkio and Keeton (2009)).…”

Section: Introductionmentioning

confidence: 99%