GAUK no. 1250218: Fines in the US banks and systemic risk: an asymmetric volatility spillover approach
| Principal investigator: | Mgr. Václav Brož |
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| Collaborators: |
prof. Ing. Evžen Kočenda Ph.D., DSc. |
| Description: | The project focuses on the link between fines related to the misconduct of the U.S.-based banks before, during, and after the global financial crisis, and the level of systemic risk in the U.S. banking sector. We will employ high-frequency data on 11 major U.S. banks in the sample period from 2008 to 2017. Our methodology is based on asymmetric volatility spillovers, in the spirit of Baruník et al. (2015, 2016, 2017). We will show: (i) whether banks emanate bad volatility spillovers (spillovers due to negative returns) after a fine is publicly announced, and (ii) whether asymmetric volatility spillovers differ in magnitude, based on the amount associated to the fine. Further, bank fines might affect systemic risk at different frequencies (cycles), in the spirit of Baruník and Křehlík (2017). Thus, we will try to uncover (i) whether there is some evidence for the impact of bank fines on volatility spillovers in the short-, medium- or long-term, and (ii) whether there is any pattern in the evolution of these cyclical components of volatility spillovers at the bank-specific level. To test for the impact of bank fines on the series of asymmetric volatility spillovers across different cycles, we will employ a test akin to the one presented in Greenwood-Nimmo et al. (2016). Our analysis is relevant for financial stability and will fill a major gap in the literature as there is virtually no research on the topic. |
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| End date: | 2019 |
| Publications: | Are the Risk Weights of Banks in the Czech Republic Procyclical? The impact of the Brexit vote on UK financial markets: a synthetic control method approach |
| Conferences: | 10th Biennial Conference of the Czech Economic Society Czech Economic Society and Slovak Economic Association Meeting 2019 |
