Abstract:

We study integration among a large sample of 1109 US banks over a quarter-century from 1990–2014. We define a bank’s level of integration (measured in percentages) as the degree of dependence of its stock returnson common national banking factors. We show that the median US bank’s integration has risen from 4.4% in 1990 to 10.1% in 2014. Integration across banks is highly unevenly distributed, appears to obey a power lawand for the median “systemically important” bank, corresponding integration levels are 6–10 times higher. The US banking sector is segmented into a small group of “core” banks, strongly integrated with each other; and alarge group of weakly integrated banks in the “periphery”. Determinants of US banks’ integration include bank size, its market beta and its idiosyncratic risk, which, all else equal, have a significantly positiveimpact; while increased reliance on deposit financing and short term financing have a significantly negative impact on integration.

About the Speaker:

Abhinav Anand is a postdoctoral research fellow at the Financial Mathematics and Computation Cluster hosted at the Smurfit Business School in University College Dublin. He completed his PhD in Economics from SUNYStony Brook in 2014 and his research interests encompass areas in the fields of banking, finance, econometrics, operations research and game theory.