مقایسه ویژگی های بهره وری بین بخشی بانکی ایالات متحده و بریتانیا در طول بحران مالی جهانی 2007-2011

This paper investigates the effect of bad or good news (asymmetric effect) on the time-varying betas of firms in the banking industries of the UK and the US during good periods (booms) and bad periods (recessions). Daily data from eleven UK and US firms of different sizes from the banking industries are applied in the empirical tests. The data ranges from 2004 to 2011, which includes the global financial crisis of 2007–2011. The time-varying betas are created by means of the bivariate BEKK GARCH model and then linear regressions are applied to test for the asymmetric effect of news on the beta. The asymmetric effects are investigated based on both market and non-market shocks. We find that most banks in the UK and the US seem to support the market efficiency hypothesis during both periods. The level of market efficiency however seems to decline significantly from the pre-crisis to the crisis period. These results shed light on the level of market efficiency and hedging strategies.

Over the past few decades the abnormality of stock prices has been investigated extensively. This resulted in the emergence of two competing mutually independent hypothesis that makes an attempt to explain certain aspects of stock price behaviour. The theory of asset mispricing explains certain anomalies of stock price behaviour via the behavioural finance argument. Asset mispricing presents an explanation to the evident over/underreaction of stock prices to information, which essentially suggests market inefficiency.2 The market efficiency theory serves to enforce the efficient market hypothesis, Fama, 1970 and Fama, 1991, Fama and French, 1992, Fama and French, 1993, Fama and French, 1998 and Fama and French, 2002. Chan (1988) and Ball and Kothari (1989), all provide evidence that there exists a predictive asymmetry in conditional betas' response to shocks. Implying that the beta of individual stock rises (falls) in response to abnormally negative (positive) returns, and argue that this asymmetric response to good and bad news explains the performance of stock returns. Ball and Kothari (1989) show that in an efficient market time-varying expected returns are caused by, variation in expected returns on the market portfolio, relative risk of a firm's investments, and leverage. Thus if the firm beta changes asymmetrically in response to news (shocks) this provides support for the efficient market hypothesis (Cho & Engle, 1999).3 Thus the detection of asymmetry in betas lends support towards market efficiency as the degree of mispricing is now less since some of it can be explained by the changing in beta. Our research views this controversy from a different perspective, through the analysis of stock returns of the UK and the US firms from the banking industries leading up to and during the financial crisis of the 2007–2011 period. In particular we study the effect of good and bad news during good periods (booms) and bad periods (recessions) on the time-varying betas of stock returns using a bivarite BEKK GARCH modelling framework. Although there is an extensive body of literature on the controversy surrounding asset mispricing and market efficiency, to the best of our knowledge there is no published research4 which looks at this puzzle during this financial crisis period and our findings make a contribution in this area. Also given the lack of research in this area for the UK and the US banking industries this paper makes a vital contribution to the literature. We proceed by describing briefly the global financial crisis of 2007–11 in Section 2. The conditional CAPM and the time-varying betas are presented in Section 3. In particular we explain how we interpret the asymmetric betas, justifying our arguments. In Section 4 we describe the data and the BEKK GARCH modelling framework we employ in further detail. In Section 5 we present the BEKK results. Section 6 explains the theoretical underpinnings of time-varying betas and the general framework that we employ to capture the effect of good and bad news leading up to and during the financial crisis period. The results of the asymmetric effects and their interpretation are in Section 7. We conclude in Section 8.

The controversy surrounding the abnormality of stock prices has been a subject of extensive research over the past few decades. The controversy can essentially be viewed as two competing mutually independent hypothesis explaining certain aspects of stock price behaviour. The first, the asset mispricing puts forth a behavioural finance argument to explain certain anomalies of stock price behaviour. The alternative argument, for market efficiency serves to enforce the efficient market hypothesis and provide evidence that the beta of individual stock rises (falls) in response to abnormally negative (positive) returns, and arguing that this asymmetric response to good and bad news explains the performance of stock returns. Given the evidence on the predictive asymmetry of volatility, we investigate the asymmetric effect of betas during good and bad periods to good and bad news and shed fresh insight into the controversy of the “abnormalities of stock prices”, i.e. whether the hypothesis of increased market efficiency or asset mispricing would better fit the empirical observations as an economy slides from a boom to a recession. We focus on the UK and the US banking industry in analysing the relative effects on the largest banks using a bivariate BEKK GARCH approach. This framework is used to capture the effects of a period when the UK and the US economies slid from relative prosperity (pre-crisis) to a recession, i.e. the current financial crisis period. We define the pre-crisis period (which we refer to as the “good” period) from January 2003 to June 2007 and the crisis period (which we refer to as the “bad” period) to commence from June 2007 to May 2011. Thus, we investigate over eight years of daily data from eleven banks, six from the US and five from the UK. We document, for the first time using UK and US market data, the level of market efficiency as the economy slides from a relative boom to a recession. We find that most banks in the UK and the US seem to support the market efficiency hypothesis during both periods. The level of market efficiency however seems to decline significantly from the pre-crisis to the crisis period. These results have implications to investors, especially hedge funds as essentially they would be presented with relatively more profitable arbitrage opportunities during a crisis period. Both results of market efficiency and declining market efficiency from the pre-crisis to crisis periods provide ample evidence of the asymmetric effect of the current financial crisis on betas. Given the status of the current crisis our results advocate future research in this field using data from different countries, different firms and using different methods.