Expert political risk opinions and banking system returns: a revised banking market model
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Human behaviour in banking and financial systems is in part made up of a complex mix of political, social and cultural factors. These factors are reflected in expert opinion based political risk scores. Market inefficiency is largely a result of anomalies in human behaviour causing information asymmetries. A basic systemic market model is re-specified into a model for international banking systems, which controls for pure political risk. Samples of developed and developing banking systems are examined. Political risk factors and world banking returns are exogenous in models of country-banking system returns. New political information assists in explaining banking system stock returns. The findings should be of interest to investors in banking stocks. Banking regulators may be assisted in decisions on appropriate levels of regulatory capital as a benchmark for banking systems. The model could help to anticipate financial crises.
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Simpson, John (2007)Human behaviour in banking and finance systems is in part made up of a complex mix of political, social and cultural factors. These factors are reflected in expert opinion based political risk scores. Market inefficiency ...
Simpson, John (2010)The purpose of this paper is to test an international bank market pricing model, hypothesised to arrive at new indicator of pure composite political risk for country banking sectors. The motivation is that current political ...
Simpson, John (2007)This study supports existing evidence of adverse domestic and international economic and financial spillover effects of extreme political acts. The relationship between the variables in the model is greater after the 9/11 ...