Size Anomalies in U.S. Bank Stock Returns
Year: 2014
Type: article
Abstract: ABSTRACT The largest commercial bank stocks, ranked by total size of the balance sheet, have significantly lower risk‐adjusted returns than small‐ and medium‐sized bank stocks, even though large banks are significantly more levered. We uncover a size factor in the component of bank returns that is orthogonal to the standard risk factors, including small minus big, which has the right covariance with bank returns to explain the average risk‐adjusted returns. This factor measures size‐dependent exposure to bank‐specific tail risk. These findings are consistent with government guarantees that protect shareholders of large banks, but not small banks, in disaster states.
Source: The Journal of Finance
DOI: 10.1111/jofi.12235
Authors: PRIYANK GANDHI, HANNO LUSTIG
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2323051730