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Measuring risk exposure in the banking sectors: evidence from Gulf Cooperation countries
Journal of Financial Economic Policy Pub Date : 2021-03-19 , DOI: 10.1108/jfep-01-2020-0008
Anwar S. Al-Gasaymeh , Thair A. Kaddumi , Ghazi M. Qasaimeh

Purpose

Using capital asset pricing model (CAPM) and the Z-risk index based on weekly data, this study aims to estimate yearly unsystematic, total, three systematic and insolvency risks in the Gulf Cooperation Council (GCC) countries for the period 2010–2018. The findings of CAPM show positive systematic market risk exposure in all GCC countries for all years, which support the contribution of stock markets to bank prices and returns. The mixed signs of systematic interest rate and exchange rate risks in GCC countries provide hedging opportunities, diversification strategies and regional cooperation, which help risk managers to hedge and stabilize their portfolios against interest rate and exchange rate fluctuations. Therefore, it is necessary that managers and policymakers develop a monitoring system on factors affecting bank insolvency risks to avoid bankruptcies and insolvencies.

Design/methodology/approach

This study uses the three-factor CAPM and Z-risk index to measure six types of risks. The CAPM uses market information to estimate the sensitivity of banks to the fluctuations of equity markets, debt markets and foreign exchange markets. Sharpe (1964), Lintner (1965) and Treynor (1965) developed a single-factor CAPM and the coefficient of the model was called systematic market risk. The single-factor CAPM highlights stock markets as the only non-diversifiable source of systematic risks, whereas Stone (1974) and Jorion (1990) highlighted interest rate and exchange rate fluctuations as the other types of non-diversifiable systematic risks. The following functional form in equation (1) estimates five types of risks using CAPM.

Findings

The findings of CAPM show positive systematic market risk exposure in all GCC countries for all years, which support the contribution of stock markets to bank prices and returns based on CAPM theory. The mixed signs of systematic interest rate and exchange rate risks in GCC countries support hedging opportunities and diversification strategies which may help risk managers to hedge and stabilize their portfolios against the fluctuations of interest rate and exchange rate. Although, this policy may decrease the profits of banking sectors but at the same time it would stabilize the portfolios and prevent bankruptcies and big losses because of the fluctuations of interest rate. Moreover, a bank has a better chance to have more liquidity position during financial crises because of the diversifications into different regional markets.

Research limitations/implications

Therefore, this study contributes to the existing literature by using risk measurement by a three-factor CAPM and the Z-risk index as discussed further in methodology.

Originality/value

It is necessary that managers and policymakers develop a monitoring system on factors affecting bank insolvency risks to avoid bankruptcies and insolvencies.



中文翻译:

衡量银行业的风险敞口:来自海湾合作国家的证据

目的

本研究使用资本资产定价模型 (CAPM) 和基于每周数据的 Z 风险指数,旨在估计海湾合作委员会 (GCC) 国家在 2010 年至 2018 年期间的年度非系统性、总体、三种系统性和破产风险。CAPM 的调查结果显示,所有 GCC 国家所有年份的系统性市场风险敞口均为正,这支持股票市场对银行价格和回报的贡献。海湾合作委员会国家系统性利率和汇率风险的混合迹象提供了对冲机会、多元化战略和区域合作,有助于风险管理人员对冲和稳定其投资组合以应对利率和汇率波动。所以,

设计/方法/方法

本研究使用三因素 CAPM 和 Z 风险指数来衡量六类风险。CAPM 使用市场信息来估计银行对股票市场、债务市场和外汇市场波动的敏感度。Sharpe (1964)、Lintner (1965) 和 Treynor (1965) 开发了单因素 CAPM,该模型的系数称为系统性市场风险。单因素 CAPM 强调股票市场是唯一不可分散的系统风险来源,而 Stone(1974)和 Jorion(1990)强调利率和汇率波动是其他类型的不可分散系统风险。以下等式 (1) 中的函数形式使用 CAPM 估计了五种类型的风险。

发现

CAPM 的研究结果表明,所有 GCC 国家所有年份的系统性市场风险敞口均为正,这支持了基于 CAPM 理论的股票市场对银行价格和收益的贡献。海湾合作委员会国家系统性利率和汇率风险的混合迹象支持对冲机会和多元化战略,这可能有助于风险管理人员对冲和稳定其投资组合以应对利率和汇率波动。虽然这一政策可能会降低银行业的利润,但同时它会稳定投资组合,防止因利率波动而导致破产和巨额损失。此外,由于进入不同区域市场的多元化,银行在金融危机期间更有可能拥有更多流动性头寸。

研究限制/影响

因此,本研究通过使用三因素 CAPM 和 Z 风险指数的风险衡量对现有文献做出了贡献,如方法论中进一步讨论的那样。

原创性/价值

管理者和政策制定者有必要针对影响银行破产风险的因素制定监测系统,以避免破产和破产。

更新日期:2021-03-19
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