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Equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis

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  • Chan-Lau, Jorge A.
  • Liu, Estelle X.
  • Schmittmann, Jochen M.

Abstract

This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk; and to a lesser extent by deteriorating funding conditions and investor sentiment. While the equity return performance in the banking sector has been dismal in general, there is some evidence that better capitalized and less leveraged banks have outperformed their peers in times of stress.

Suggested Citation

  • Chan-Lau, Jorge A. & Liu, Estelle X. & Schmittmann, Jochen M., 2015. "Equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis," Journal of Financial Stability, Elsevier, vol. 16(C), pages 164-172.
    • Handle: RePEc:eee:finsta:v:16:y:2015:i:c:p:164-172
    DOI: 10.1016/j.jfs.2014.07.003
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    More about this item

    Keywords

    Banks equity returns; Financial crisis; Sovereign debt crisis; Economic growth; Regulatory capital;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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