TY  - JOUR
AU  - Kane,Edward J.
AU  - Unal,Haluk
TI  - Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2693
PY  - 1990
Y2  - May 1990
UR  - http://www.nber.org/papers/w2693
L1  - http://www.nber.org/papers/w2693.pdf
N1  - Author contact info:
Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 520-299-5066
E-Mail: edward.kane@bc.edu

Haluk Unal
10809 Tara Road
Potomac, MD 20742
Tel: 240-429-7827
E-Mail: hunal@rhsmith.umd.edu
AB  - This paper decomposes both the market sensitivity and the interest-rate sensitivity of bank stock into on-balance-sheet and off-balance-sheet components. It derives these constituent and often-offsetting sensitivities from a nonstationary three-equation model that employs accounting and capital-market information to explain cross-sectional and temporal variation in the value of stockholder equity. To control statistically for heteroskedasticity and intrasample differences in unbooked capital positions, the model is estimated separately for three size classes of large U.S. banks. Parameter estimates confirm the importance of "hidden" or unbooked capital at these banks. For the nation's very largest banks, shifts in the value of these parameters are consistent with the view that the capitalized value of federal deposit-insurance guarantees burgeoned in the 1980s with interest volatility, demonstrations of regulatory forbearance, and relaxation of deposit-rate ceilings.
ER  -