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http://hdl.handle.net/10609/147077
Title: | Commonality, macroeconomic factors and banking profitability |
Author: | Joaqui-Barandica, Orlando Manotas-Duque, Diego Fernando Uribe, Jorge M. |
Others: | Universidad del Valle Universitat Oberta de Catalunya (UOC) Universitat de Barcelona (UB) |
Citation: | Joaqui-Barandica, O., Manotas, D. & Uribe, J.M. (2022). Commonality, macroeconomic factors and banking profitability. North American Journal of Economics and Finance, 62, 1-39. doi: 10.1016/j.najef.2022.101714 |
Abstract: | We study banks’ profitability in the US economy by means of dynamic factor models. Our results emphasize the importance of a few common cyclical market factors that greatly determine banking profitability. We conduct exhaustive regressions in a big data set of macroeconomic variables aiming to gain interpretability of our statistical factors. This allows us to identify three main macroeconomic factors underlying banking profitability: the financial burden of households and economic activity; household income and net worth and, in the case of ROA and ROE, stress in financial markets. We also provide an integrated perspective to analyse banks’ profitability dynamically and to inform policymakers concerned with financial stability issues, for which banks’ profitability is fundamental. Our models allow us to provide several rankings of vulnerable financial institutions considering the common market forces that we estimate. We emphasize the usefulness of such an exercise as a market-monitoring tool. |
Keywords: | Banks’ ROA Stress in financial markets Dynamic factors Financial cycles |
DOI: | http://doi.org/10.1016/j.najef.2022.101714 |
Document type: | info:eu-repo/semantics/article |
Version: | info:eu-repo/semantics/publishedVersion |
Issue Date: | 2-Jun-2022 |
Publication license: | https://creativecommons.org/licenses/by-nc-nd/4.0/ |
Appears in Collections: | Articles Articles cientÍfics |
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1-s2.0-S1062940822000663-main.pdf | 3,92 MB | Adobe PDF | View/Open |
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