Arbeitspapier

Predictability in the cross-section of European bank stock returns

This paper investigates the impact of individual bank fundamental variables on stock market returns using data from a panel of 235 European banks from 1991 to 2005. The sample period marks a significant transition in the European banking sector, characterized by higher competition, lower profit margins in the traditional interest-related business and increasing non-interest income in terms of fees and commissions. In panel regressions, we relate bank stock returns to fundamental accounting information and use several corrections for the standard errors to control for heteroscedasticity, autocorrelation and spatial correlation. Our results indicate that several bank-specific variables exhibit a robust explanatory power across different model specifications. Most important, there is a positive impact of the ratio of loans to total assets, the ratio of non-interest income to total income, and the ratio of off-balance sheet items to total assets on subsequent bank stock returns. In contrast, the ratio of loan-loss-provisions to net interest revenue and the ratio of book value of equity to total assets load negatively on subsequent bank stock returns. Overall, the valuation of bank stocks incorporates both the traditional loan-related side of the banking business and the growing off-balance activities.

Sprache
Englisch

Erschienen in
Series: WWZ Working Paper ; No. 21/07

Klassifikation
Wirtschaft
Semiparametric and Nonparametric Methods: General
Asset Pricing; Trading Volume; Bond Interest Rates
Information and Market Efficiency; Event Studies; Insider Trading
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Thema
Asset pricing
bank stock returns
bank-specific accounting ratios
Kapitaleinkommen
Aktie
Bank
Betriebliche Kennzahl
Prognoseverfahren
Schätzung
Europa

Ereignis
Geistige Schöpfung
(wer)
Drobetz, Wolfgang
Erdmann, Thomas
Zimmermann, Heinz
Ereignis
Veröffentlichung
(wer)
University of Basel, Center of Business and Economics (WWZ)
(wo)
Basel
(wann)
2007

DOI
doi:10.5451/unibas-ep61232
Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Drobetz, Wolfgang
  • Erdmann, Thomas
  • Zimmermann, Heinz
  • University of Basel, Center of Business and Economics (WWZ)

Entstanden

  • 2007

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