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On mean–variance analysis of a bank’s behavior

Author

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  • Takino, Kazuhiro
  • Ishinagi, Yoshikazu

Abstract

We consider the mean–variance utility maximization problem for banks. In particular, we consider the utility maximization problems of the portfolio return and accounting profit. Moreover, we consider balance sheet models for both conditions irrespective of whether the items on the liability side are internalized in terms of assets. The calibration result shows that there is no significant difference in the accuracies of the fit of the utility maximization models for the portfolio return and accounting profit as long as the balance sheet is internalized. Therefore, internalization of the balance sheet model is important to describe the bank’s behavior.

Suggested Citation

  • Takino, Kazuhiro & Ishinagi, Yoshikazu, 2022. "On mean–variance analysis of a bank’s behavior," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003263
    DOI: 10.1016/j.frl.2021.102292
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    References listed on IDEAS

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    More about this item

    Keywords

    Bank’s behavior; Bank’s asset allocation; Mean–variance analysis;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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