TY  - JOUR
AU  - Calomiris,Charles W.
AU  - Nissim,Doron
TI  - Activity-Based Valuation of Bank Holding Companies
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12918
PY  - 2007
Y2  - February 2007
UR  - http://www.nber.org/papers/w12918
L1  - http://www.nber.org/papers/w12918.pdf
N1  - Author contact info:
Charles W. Calomiris
Graduate School of Business
Columbia University
3022 Broadway Street, Uris Hall
New York, NY 10027
Tel: 212/854-8748
Fax: 212/316-9219
E-Mail: cc374@columbia.edu

Doron Nissim
Graduate School of Business
Columbia University
3022 Broadway
New York, NY 10027
E-Mail: dn75@columbia.edu
AB  - Standard valuation methods do not lend themselves to bank holding companies. Banks create value through the types of assets and liabilities they create (e.g., lending and deposit taking relationships). Bank income streams reflect heterogeneous sources of income which differ in their margins of profitability and persistence. Our approach to valuation permits potential differences in the composition of assets, liabilities, income and expenses, and in the profitability and persistence of different sources of income, to reflect themselves in estimated relationships that relate the composition of the balance sheet and income statement to bank value. Our approach explains substantial cross-sectional variation in observed market-to-book values, and residuals from cross-sectional regressions of market-to-book values are useful for predicting future stock returns. Predictable future variation in returns does not reflect priced risk factors, but is related to trading costs.
ER  -