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Bank Risk and Real Estate: An Asset Pricing Perspective

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  • Mei, Jianping
  • Saunders, Anthony

Abstract

While a number of papers have investigated the time-series behavior of ex post bank stock returns and real estate returns, no study has comprehensively studied the relationship between ex ante risk premiums on both assets and the time-varying nature of such premiums in relationship to economic and real estate market conditions. In this study, we investigate how the changing nature of bank risk taking, especially in the real estate market, has affected the ex ante pricing of risk in the market for bank stocks. We find that the time variation in bank risk premiums are partly determined by interest rate and real estate market conditions. We also discover that the real estate factor has been important for banks in the 1980s. Copyright 1995 by Kluwer Academic Publishers

Suggested Citation

  • Mei, Jianping & Saunders, Anthony, 1995. "Bank Risk and Real Estate: An Asset Pricing Perspective," The Journal of Real Estate Finance and Economics, Springer, vol. 10(3), pages 199-224, May.
    • Handle: RePEc:kap:jrefec:v:10:y:1995:i:3:p:199-224
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    Cited by:

    1. Barbara Fidanza & Ottorino Morresi, 2021. "Size and Value Anomalies in European Bank Stocks," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 227-227, July.
    2. Elie Bouri & Mahamitra Das & Rangan Gupta & David Roubaud, 2018. "Spillovers between Bitcoin and other assets during bear and bull markets," Applied Economics, Taylor & Francis Journals, vol. 50(55), pages 5935-5949, November.
    3. Bessler, Wolfgang & Kurmann, Philipp & Nohel, Tom, 2015. "Time-varying systematic and idiosyncratic risk exposures of US bank holding companies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 45-68.
    4. Silvia Bressan, 2024. "Environmental, Social, and Governance Scores and Loan Composition Inside United States Banks," Sustainability, MDPI, vol. 16(18), pages 1-11, September.
    5. Carsten Lausberg, 2001. "Evidence of its Importance and Instruments to Handle it. The Real Estate Market Risk of Banks," ERES eres2001_205, European Real Estate Society (ERES).
    6. Barbara Fidanza & Ottorino Morresi, 2015. "Does the Fama-Franch three-factor model work in the financial industry? Evidence from European bank stocks," Working Papers 47-2015, Macerata University, Department of Studies on Economic Development (DiSSE), revised May 2015.
    7. António Miguel Martins & Ana Paula Serra, 2012. "Real Estate Market Risk in Bank Stock Returns: Evidence for 15 European Countries," CEF.UP Working Papers 1203, Universidade do Porto, Faculdade de Economia do Porto.
    8. Elyas Elyasiani & Iqbal Mansur & Jill Wetmore, 2010. "Real-Estate Risk Effects on Financial Institutions’ Stock Return Distribution: a Bivariate GARCH Analysis," The Journal of Real Estate Finance and Economics, Springer, vol. 40(1), pages 89-107, January.
    9. Bessler, Wolfgang & Kurmann, Philipp, 2014. "Bank risk factors and changing risk exposures: Capital market evidence before and during the financial crisis," Journal of Financial Stability, Elsevier, vol. 13(C), pages 151-166.
    10. Chiuling Lu & Raymond So, 2005. "Return Relationships between Listed Banks and Real Estate Firms: Evidence from Seven Asian Economies," The Journal of Real Estate Finance and Economics, Springer, vol. 31(2), pages 189-206, September.

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