Intra- and inter-regional portfolio diversification strategies under regional market integration: Evidence from U.S. global banks

Lee, Eunjoo

doi:10.1016/j.irfa.2017.08.001

Cited by 8 publications

(7 citation statements)

References 61 publications

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“…However, some research shows the mixed result on this issue. Pennathur et al (2012) and Lee (2017) show that government banks tend to do less diversification because they are relatively less efficient and less innovative to expand their operation to nontraditional bank business. Meanwhile, Carvalho et al (2014) find that government-owned banks are not the least efficient bank among other types of bank.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Market Power, Types of Ownership and Bank Income Diversification: Cases of Asian Countries

Robertho

Wibowo

2018

JDM

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This study aims to analyze the effects of market power and type of ownership on bank' s income diversification in Indonesia, Malaysia, the Philippines, Thailand, and China. Banks diversifies their source of income to stabilize profitability level. Bank' s market power is a critical factor which affect its income diversification efforts. This study uses Lerner Index as a proxy for banks' market power. By using a sample of 80 banks in five countries from 2012 to 2016 and operating Fixed Effect Model and Generalized Least Square, the result shows that banks with greater market power earn more non-interest income, except in the Philippines. Also, government ownership is proven to heighten the relation between market power and income diversification, with consistent results shown in each subsamples. Foreign ownership also heighten the relation between market power and income diversification, except in Thailand. Info Article

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Section: Hypothesis Developmentmentioning

confidence: 99%

Market Power, Types of Ownership and Bank Income Diversification: Cases of Asian Countries

Robertho

Wibowo

2018

JDM

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“…The health crisis also had a strong impact on the capital markets and on the main stock indexes, bringing uncertainty and instability (Ali et al, 2020;Liu et al, 2020;Saadat et al, 2020;Vochozka et al, 2020). Therefore, the periods of crisis are challenging to investors, which want to mitigate risks using portfolio diversification strategies (Lee, 2017). It is of high relevance to detect international links between capital markets and to verify if they are financially integrated.…”

Section: Introductionmentioning

confidence: 99%

“…Therefore, the low correlation between international stock markets is a key circumstance for portfolio diversification. For this purpose, the understanding of international links between capital markets in periods of financial crisis is of higher relevance for investors, fund managers and academics (Lee, 2017). Thus, the occurrence of integration between capital markets can have significant implications for the international diversification of risk (Dias et al, 2019), or even, the degree of integration could be directly correlates with economic growth (Hoffmann et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Integration in Central European capital markets in the context of the global COVID-19 pandemic

Pardal

Dias

Šuleř

et al. 2020

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Research background: Covid-19 pandemic had a strong impact on the economy and capital market. In times of crisis, it is important for investors to be able to diversify their investment portfolio in order to mitigate risk. However, the growing trend towards capital market integration may make it ineffective. Research on financial integration, during the Covid-19 period, has started to develop, mainly in major global capital markets. It is, therefore, important to extend this research to other capital markets. The purpose of the article: This contribution aims to analyze financial integration in the stock indexes of the capital markets of Austria (ATX), Slovenia (SBITOP), Hungary (BUDAPEST SE), Lithuania (OMX VILNIUS), Poland (WIG), the Czech Republic (PX PRAGUE), Russia (MOEX) and Serbia (BELEX 15), in the context of the global pandemic (COVID-19). Methods: To measure the unit roots in the time series, we used ADF, PP, and KPSS tests, and Clemente et al. (1998) test to detect structural breaks. To ana-lyse financial integration, we applied the Gregory and Hansen integration test, and to validate the robustness of results, we use the impulse-response function (IRF) methodology, with Monte Carlo simulations, as they provide a dynamic analysis generated from the VAR model estimates. Findings & Value added: The results suggest very significant levels of integration, which decreases the chances of portfolio diversification in the long-term. Evidence shows 47 pairs of integrated stock market indexes (out of 56 possible). The stock indexes ATX, BUDAPESTE SE, BELEX 15 show financial integration with all other indexes. On the contrary, the index of OMX VILNIUS shows only 3 integrations. Results also show that most of the significant structural breaks occurred in March 2020. The analysis of the relationship between markets, in the short term, shows positive/negative co-movements, with statis-tical significance and with a persistence longer than one week.

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“…The two major enhancements made were the expansion of banks' balance sheets coverage to include their domestic positions and international activities; and also to provide more information about the sectors of banks' counterparties and banks' exposures (Kharroubi and Kohlscheen, 2017). This was done within mind that even when vulnerabilities are not quite apparent through a country's macro-economic indicators, weaknesses in particular sectors can still be transmitted globally through cross-border bank exposures and have wider consequences for financial stability (Grilli et al, 2014;Jang, 2017;Lee, 2017;Spiegel, 2010, 2011).…”

Section: Introductionmentioning

confidence: 99%

“…A major purpose of collecting this data is to identify country risk, that is the potential for a claim on a foreign counterparty held by a U.S. bank to become impaired or eventually subject to losses (Palmer, 2000).Given the levels of market volatility observed in most countries during the financial crises (Aoki and Nikolov, 2015;Boissay et al, 2016;Gregory, 2010), attention to claims on foreign counterparties provides the opportunity to better shield the U.S. financial system against external shocks (Lee, 2017;Niepmann and Schmidt-Eisenlohr, 2017). IBS latest report on global banks' activities shows a growth in International banks' claims in the first quarter of 2017 (Kharroubi and Kohlscheen, 2017).…”

Section: Introductionmentioning

confidence: 99%

Relative Contribution of Public Sector, Banking Sector, and Non-Bank Financial Sector Claims in U.S. Global Banks' Exposure to Foreign Counterparties' Default Risks

Niankara¹,

Ismail²

2018

Preprint

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This paper relies on accounting-based measures of country risk to investigate U.S. global banks' exposure to foreign country risk over the 2017 fiscal year as measured by the sum of cross-border risk, foreign office risk, and derivative risk claims. We achieve this using panel linear modeling methods with country level heterogeneity and time fixed effects, along with a constructed panel data of 284 observations on 71 countries distributed across 6 world regional blocks, and observed over 4 consecutive quarters starting from 4th quarter 2016 and ending with 3rd quarter 2017. The results show that on average, over the four quarters, a 1% increase in foreign banking sector's claims significantly increases U.S. global banks cross border risk exposure by 0.34%, while reducing derivative risk exposure by 0.22%, but have no significant impact on foreign office risk exposure. Similar results are observed with public sector claims which significantly increase banks' exposure to cross border risk by 0.21%, while reducing derivative risk exposure by 0.19%. Conversely however, non-bank financial sector claims are found to have no significant affect on cross-border risk exposure, but significantly reduce foreign office risk exposure by 0.09%, while increasing derivative risk exposure by 0.06%. These results indicate the presence of sectoral heterogeneities in U.S. banks' exposure to foreign counterparties' risk, and also that overall, over the course of 2017 the level of U.S. global banks' cross-border risk exposure increased, while their level of derivative risk exposure decreased, and the level of foreign office risk exposure remained relatively unchanged.

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Intra- and inter-regional portfolio diversification strategies under regional market integration: Evidence from U.S. global banks

Cited by 8 publications

References 61 publications

Market Power, Types of Ownership and Bank Income Diversification: Cases of Asian Countries

Market Power, Types of Ownership and Bank Income Diversification: Cases of Asian Countries

Integration in Central European capital markets in the context of the global COVID-19 pandemic

Relative Contribution of Public Sector, Banking Sector, and Non-Bank Financial Sector Claims in U.S. Global Banks' Exposure to Foreign Counterparties' Default Risks

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