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How did major global asset classes respond to Silicon Valley Bank failure?

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  • Azmi, Wajahat
  • Anwer, Zaheer
  • Azmi, Shujaat Naeem
  • Nobanee, Haitham

Abstract

We explore the impact of Silicon Valley Bank failure on 11 major global assets using event study approach. The findings reveal that except for Gold and US Treasury Bills, there is no significant response from other asset classes on the event day. Gold is perceived as a safe haven by investors on the event day. The investors shredded investments in US Treasury Bills on event day and post event, an outcome of uncertainty shrouding monetary policy stance of Federal Reserve in the aftermath of Silicon Valley Bank failure. We also estimated Net Total Directional Connectedness based on a TVP-VAR model for the sampled assets. The results remained robust to this approach. Overall, we find little evidence of reputation contagion or spillover from the failure of SVB to other asset classes. In respect of implications, it can be inferred that the diversified portfolios, precious metals, USD, cryptocurrencies, ESG and Clean Energy assets may be employed to diversify the portfolios during crisis periods. In addition, US monetary authorities should endeavor to reduce market uncertainty. Finally, Crude Oil appears to be vulnerable to adverse market conditions and may be included in the portfolios with caution during looming crises periods.

Suggested Citation

  • Azmi, Wajahat & Anwer, Zaheer & Azmi, Shujaat Naeem & Nobanee, Haitham, 2023. "How did major global asset classes respond to Silicon Valley Bank failure?," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004956
    DOI: 10.1016/j.frl.2023.104123
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    Cited by:

    1. Nobanee, Haitham & Azmi, Wajahat & Chakraborty, Dipanwita & Hamill, Philip Anthony & Nghiem, Xuan-Hoa, 2023. "Can we breathe a sigh of relief now? The impact of First Republic Bank takeover by JP Morgan on the US equity markets," Finance Research Letters, Elsevier, vol. 58(PB).
    2. Azmi, Wajahat & Azmi, Shujaat Naeem & Nobanee, Haitham & Hamill, Philip Anthony, 2023. "Uncovering the repercussions of the US's credit rating downgrade on global equity markets," Finance Research Letters, Elsevier, vol. 58(PD).
    3. Bales, Stephan & Burghof, Hans-Peter, 2024. "Public attention, sentiment and the default of Silicon Valley Bank," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    4. Mehdian, Seyed & Gherghina, Ștefan Cristian & Stoica, Ovidiu, 2024. "Intraday financial markets’ response to U.S. bank failures," Finance Research Letters, Elsevier, vol. 60(C).
    5. Ali, Shoaib & Naveed, Muhammad & Gubareva, Mariya & Vinh Vo, Xuan, 2024. "Reputational contagion from the Silicon Valley Bank debacle," Research in International Business and Finance, Elsevier, vol. 69(C).
    6. Liu, Xia & Megginson, William & Tran, Nhu & Wei, Siqi, 2024. "Who Loses Most When Big Banks Suddenly Fail? Evidence from Silicon Valley Bank Collapse," Finance Research Letters, Elsevier, vol. 59(C).
    7. Ali, Shoaib & Moussa, Faten & Youssef, Manel, 2023. "Connectedness between cryptocurrencies using high-frequency data: A novel insight from the Silicon Valley Banks collapse," Finance Research Letters, Elsevier, vol. 58(PB).
    8. Aharon, David Y. & Ali, Shoaib, 2024. "A high-frequency data dive into SVB collapse," Finance Research Letters, Elsevier, vol. 59(C).
    9. Esparcia, Carlos & Escribano, Ana & Jareño, Francisco, 2023. "Did cryptomarket chaos unleash Silvergate's bankruptcy? investigating the high-frequency volatility and connectedness behind the collapse," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Bank run; SVB; Reputation contagion; Evenst study;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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