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    A market based composite political risk indicator for the international banking industry

    134347_17249_CRAE WP201008 Simpson Market Based Composite.pdf (157.7Kb)
    Access Status
    Open access
    Authors
    Simpson, John
    Date
    2010
    Type
    Working Paper
    
    Metadata
    Show full item record
    Citation
    Simpson, John. 2010. A market based composite political risk indicator for the international banking industry, Centre for Research in Applied Economics Working Paper Series: no. 201008, Curtin University of Technology, School of Economics and Finance.
    Additional URLs
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1715236
    Faculty
    Curtin Business School
    The Centre of Research in Applied Economics (CRAE)
    School
    School of Economics and Finance
    URI
    http://hdl.handle.net/20.500.11937/3829
    Collection
    • Curtin Research Publications
    Abstract

    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 risk ratings (rating social, legal and cultural factors that impact political environments in countries) are largely subjectively quantified and are not frequently published. Political risk has not been a focus in media commentary to date on the global economic and financial spillovers of 2008/2009. An international capital asset pricing model for a banking system is useful as long as systemic interdependence, the degree of global integration, and country size and wealth can be controlled for as well as the impact on a country banking system of that country's stock market. The selected sample contains examples of country banking systems in developed and developing countries. The policy implications of the paper are that investors in banking portfolios, trade and investment policy formulators as well as banking regulators should be aware that it is possible that pure political risk indicators may be obtained as a daily management tool rather than monthly, from an analysis of international stock and banking market generated data.

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