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| Carlos Bautista, Philippe Rous and Amine Tarazi |
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| ''The determinants of bank stock return's co-movements in East Asia'' |
| ( 2009, Vol. 29 No.3 ) |
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| We examine co-movements of bank stock returns in eight East Asian countries after the 1997
crisis and attempt to determine the factors that influence them. Unlike Bautista and al (2008) who
focus on a measure of the contribution of banks to systemic risk, we consider the return correlations
among banks within each country which are used as a dependent variable in weighted least
squares regressions. The factors were chosen from a wide range of accounting and market-based
indicators, but also macroeconomic and financial development data, using a stepwise procedure. The
study finds that financial development is one of the significant determinants of return co-movement but
that the share of interbank activities in the balance sheet is not a significant factor. A strong link is
found between the bank return co-movements and bank default risk measured by a z-score. To a
lesser extent, the share of loan activities in a bank's balance sheet, which is a proxy of opacity, is
also a significant factor of the level of correlation.
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| Keywords: Bank contagion, East Asia, Correlation of bank stock returns |
JEL: G2 - Financial Institutions and Services: General
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| Manuscript Received : Feb 20 2009 | | Manuscript Accepted : Jul 06 2009 |
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