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Bank insolvency risk and aggregate Z-score measures: a caveat

Author

Listed:
  • Frank Strobel

    (University of Birmingham)

Abstract

We demonstrate that a popular approach to constructing (weighted) mean-based aggregate bank insolvency risk measures is inherently biased; we also suggest an alternative approach that avoids this problem.

Suggested Citation

  • Frank Strobel, 2010. "Bank insolvency risk and aggregate Z-score measures: a caveat," Economics Bulletin, AccessEcon, vol. 30(4), pages 2576-2578.
    • Handle: RePEc:ebl:ecbull:eb-10-00540
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P237.pdf
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    References listed on IDEAS

    as
    1. Asli Demirgüç-Kunt & Ms. Enrica Detragiache, 2010. "Basel Core Principles and Bank Risk: Does Compliance Matter?," IMF Working Papers 2010/081, International Monetary Fund.
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    Cited by:

    1. Hassan Belkacem Ghassan & Abdelkrim Ahmed Guendouz, 2019. "Panel modeling of z-score: evidence from Islamic and conventional Saudi banks," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 12(3), pages 448-468, July.
    2. Ghassan, Hassan B. & Taher, Farid B., 2013. "Financial Stability of Islamic and Conventional Banks in Saudi Arabia: Evidence using Pooled and Panel Models," MPRA Paper 54472, University Library of Munich, Germany, revised Dec 2013.
    3. Wassim RAJHI & Slim A. HASSAIRI, 2013. "Islamic Banks And Financial Stability: A Comparative Empirical Analysis Between Mena And Southeast Asian Countries," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 37, pages 149-177.
    4. Kanas, Angelos, 2014. "Default risk and equity prices in the U.S. banking sector: Regime switching effects of regulatory changes," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 244-258.
    5. Ghassan, Hassan B. & Krichene, Noureddine, 2017. "Financial Stability of Conventional and Islamic Banks: A Survey," MPRA Paper 82372, University Library of Munich, Germany.
    6. Wassim Rajhi, 2015. "Islamic Banks and Financial Stability: A Quantile Estimation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2846-2852.

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    More about this item

    Keywords

    insolvency risk; aggregate Z-score; Jensen's inequality;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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