Arbeitspapier
Investing in crises
We investigate asset returns around banking crises in 44 advanced and emerging economies from 1960 to 2018. In contrast to the view that buying assets during banking crises is a profitable long-run strategy, we find returns of equity and other asset classes generally underperform after banking crises. While prices are depressed during crises and partially recover after acute stress ends, consistent with theories of fire sales and intermediary-based asset pricing, we argue that investors do not fully anticipate the consequences of debt overhang, which result in lower long-run dividends. Our results on bank stock underperformance suggest that government-funded bank recapitalizations can often lead to substantial taxpayer losses.
- ISBN
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978-92-899-4548-6
- Language
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Englisch
- Bibliographic citation
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Series: ECB Working Paper ; No. 2548
- Classification
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Wirtschaft
Portfolio Choice; Investment Decisions
Information and Market Efficiency; Event Studies; Insider Trading
International Financial Markets
Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡
- Subject
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investments
financial crises
returns
fire sales
- Event
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Geistige Schöpfung
- (who)
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Baron, Matthew
Laeven, Luc
Pénasse, Julien
Usenko, Yevhenii
- Event
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Veröffentlichung
- (who)
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European Central Bank (ECB)
- (where)
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Frankfurt a. M.
- (when)
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2021
- DOI
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doi:10.2866/946664
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Baron, Matthew
- Laeven, Luc
- Pénasse, Julien
- Usenko, Yevhenii
- European Central Bank (ECB)
Time of origin
- 2021