This paper investigates the extent of vulnerability in the U.S. commercial banking system through a pro-cyclical interaction between the market-wide risk perception and system-wide asset management behavior. Based on a Markov regimeswitching model, the proposed diagnostic framework clearly illustrates its ability to provide an early warning signal of the build-up and unwinding of fragility in the financial system and the real economy for a counter-cyclical structure of regulatory policy. Empirical results demonstrate an asset pricing implication, as the proposed systemic bubble index is a significant factor that affects the investment opportunity set of stock investors for financial firms but not for non-financial firms.
Keywords: Systemic bubble; Financial crisis; Cyclicality; Early warning signal; Markov regime-switching model
JEL classification: C13, G01, G21, G28
자료실
자료실
[2014년 제 4차] Systematic Cyclicality of Systemic Bubbles: Evidenc
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2014-12-12