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Opacity and the comovement in the stock prices of banks

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  • Benjamin M. Blau
  • Todd G. Griffith
  • Ryan J. Whitby

Abstract

We examine whether the stock prices of banks co‐move more than the stock prices of non‐banks, and whether that comovement is driven by informational opacity. Since the risks associated with the financial intermediation process are relatively opaque to outside investors, valuing banks can be difficult and information acquisition can be costly. We introduce a measure of comovement, denoted as beta dispersion, that identifies how closely a particular stock co‐moves with the average industry CAPM beta. We find that bank stock prices generally co‐move more than non‐bank stock prices, and that opacity is driving the higher levels of comovement.

Suggested Citation

  • Benjamin M. Blau & Todd G. Griffith & Ryan J. Whitby, 2020. "Opacity and the comovement in the stock prices of banks," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3557-3580, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:4:p:3557-3580
    DOI: 10.1111/acfi.12507
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    References listed on IDEAS

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    1. Mies, Michael, 2024. "Bank opacity, systemic risk and financial stability," Journal of Financial Stability, Elsevier, vol. 70(C).

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