Skip to main content
Erschienen in:

05.08.2021

Fuelling fire sales? Prudential regulation and crises: evidence from the Italian market

Erschienen in: Journal of Economics and Finance | Ausgabe 1/2022

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

The ECB announcement to reduce capital requirements for market risk to smooth pro-cyclicality, published in April 2020, is a good starting point to discuss the impact of regulation on individual banks on the stability of the whole banking and financial system.
A large number of theoretical articles and a few empirical papers back the existence of an amplification effect on market volatility caused by the use of risk management measures (e.g. value-at-risk, VaR, for market risk) for regulatory purposes. However, to the best of my knowledge, no paper has empirically investigated the direct relation between the level of tightness of VaR risk limits and market volatility.
In this article, I show that market volatility is positively related to past values of the measure of the tightness of the market risk limit, with an overshooting process of adjustment toward equilibrium. The analysis is limited to Italy. The empirical results, based on a unique dataset of VaR values and on other publicly available market data, are in line with the theoretical findings and are novel empirical evidence. They open the way to additional research on how to manage the channels of transmission of the amplification and overshooting effects from the risk management measure to systemic variables, to avoid unintended consequences of the application of individual supervision measures on the whole system.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Literatur
Zurück zum Zitat Adrian T, Boyarchenko N (2012) Intermediary leverage cycles and financial stability. Federal Reserve Bank of New York Staff Reports, August 2012, No 567 Adrian T, Boyarchenko N (2012) Intermediary leverage cycles and financial stability. Federal Reserve Bank of New York Staff Reports, August 2012, No 567
Zurück zum Zitat Adrian T, Shin HS (2008) In A Beyer, L Reichlin (eds), The role of money—money and monetary policy in the twenty-first century, fourth ECB central banking conference held on 9–10 November 2006. European Central Bank, Frankfurt, pp 299–309 Adrian T, Shin HS (2008) In A Beyer, L Reichlin (eds), The role of money—money and monetary policy in the twenty-first century, fourth ECB central banking conference held on 9–10 November 2006. European Central Bank, Frankfurt, pp 299–309
Zurück zum Zitat Adrian T, Shin HS (2010) Liquidity and leverage. Journal of Financial Intermediation 19:418–437CrossRef Adrian T, Shin HS (2010) Liquidity and leverage. Journal of Financial Intermediation 19:418–437CrossRef
Zurück zum Zitat Adrian T, Shin HS (2013) Pro-cyclical leverage and value-at-risk. Review of Financial Studies 27(2):373–403CrossRef Adrian T, Shin HS (2013) Pro-cyclical leverage and value-at-risk. Review of Financial Studies 27(2):373–403CrossRef
Zurück zum Zitat Andritzky JR (2012) Government bonds and their investors: what are the facts and do they matter? IMF working paper No. 12/158. International Monetary Fund, Washington Andritzky JR (2012) Government bonds and their investors: what are the facts and do they matter? IMF working paper No. 12/158. International Monetary Fund, Washington
Zurück zum Zitat Banca d’Italia (2012) Banca d’Italia, Nuove disposizioni di vigilanza prudenziale per le banche, circolare n. 263, updated on 29 May 2012 Banca d’Italia (2012) Banca d’Italia, Nuove disposizioni di vigilanza prudenziale per le banche, circolare n. 263, updated on 29 May 2012
Zurück zum Zitat Bernanke B (2006) Modern risk management and banking supervision. Speech at the Stonier Graduate School of Banking, Washington, D.C. Bernanke B (2006) Modern risk management and banking supervision. Speech at the Stonier Graduate School of Banking, Washington, D.C.
Zurück zum Zitat Brooks R (2007) Power arch modelling of the volatility of emerging equity markets. Emerg Mark Rev 8(2):124–133CrossRef Brooks R (2007) Power arch modelling of the volatility of emerging equity markets. Emerg Mark Rev 8(2):124–133CrossRef
Zurück zum Zitat Brousseau C, Gendron M, Bélanger P, Coupland J (2014) Does fair value accounting contribute to market price volatility? An experimental approach. Accounting Finance 54:1033–1061CrossRef Brousseau C, Gendron M, Bélanger P, Coupland J (2014) Does fair value accounting contribute to market price volatility? An experimental approach. Accounting Finance 54:1033–1061CrossRef
Zurück zum Zitat Brunnermeier MK, Pedersen LH (2009) Market liquidity and funding liquidity. Review of Financial Studies 22(6):2201–2238CrossRef Brunnermeier MK, Pedersen LH (2009) Market liquidity and funding liquidity. Review of Financial Studies 22(6):2201–2238CrossRef
Zurück zum Zitat Cont R, Wagalath L (2014) Fire sales Forensics: Measuring endogenous risk. Math Financ 26:835–866CrossRef Cont R, Wagalath L (2014) Fire sales Forensics: Measuring endogenous risk. Math Financ 26:835–866CrossRef
Zurück zum Zitat Danielsson J, Embrechts P, Goodhart C, Keating C, Muennich F, Renault O, Shin HS (2001) An academic response to Basel II, Special Paper, no 130, LSE Financial Markets Group, ESRC Research Centre, May 2010. Available at https://www.bis.org/bcbs/ca/fmg.pdf. Retrieved on 05 March 2014 Danielsson J, Embrechts P, Goodhart C, Keating C, Muennich F, Renault O, Shin HS (2001) An academic response to Basel II, Special Paper, no 130, LSE Financial Markets Group, ESRC Research Centre, May 2010. Available at https://​www.​bis.​org/​bcbs/​ca/​fmg.​pdf. Retrieved on 05 March 2014
Zurück zum Zitat Danielsson J, Shin HS, Zigrand JP (2004) The impact of risk regulation on price dynamics. J Bank Finance 28(5):1069–1087CrossRef Danielsson J, Shin HS, Zigrand JP (2004) The impact of risk regulation on price dynamics. J Bank Finance 28(5):1069–1087CrossRef
Zurück zum Zitat Fiordelisi F, Marqués-Ibañez D (2013) Is bank default risk systematic? J Bank Finance 37(6):2013CrossRef Fiordelisi F, Marqués-Ibañez D (2013) Is bank default risk systematic? J Bank Finance 37(6):2013CrossRef
Zurück zum Zitat FTSE (2014) FTSE Factsheet 30th May 2014, FTSE MIB Implied Volatility Index, FTSE Group. Retrieved 15 May 2016 from https://ftse.com FTSE (2014) FTSE Factsheet 30th May 2014, FTSE MIB Implied Volatility Index, FTSE Group. Retrieved 15 May 2016 from https://​ftse.​com
Zurück zum Zitat Jones S (2015) The Routledge companion to financial accounting theory, Ch. 9. Routledge, AbingdonCrossRef Jones S (2015) The Routledge companion to financial accounting theory, Ch. 9. Routledge, AbingdonCrossRef
Zurück zum Zitat Lafuente-Luengo J (2009) Intraday realised volatility relationships between the S&P 500 spot and future market. Journal of Derivatives and Hedge Funds 15:2009CrossRef Lafuente-Luengo J (2009) Intraday realised volatility relationships between the S&P 500 spot and future market. Journal of Derivatives and Hedge Funds 15:2009CrossRef
Zurück zum Zitat Lutkepohl H (2007) New introduction to multiple time series analysis. Springer, Berlin Lutkepohl H (2007) New introduction to multiple time series analysis. Springer, Berlin
Zurück zum Zitat Ozcicek O, McMillin DW (1999) Lag length selection in vector autoregressive models: symmetric and asymmetric lags. Appl Econ 31(4):517–524 Ozcicek O, McMillin DW (1999) Lag length selection in vector autoregressive models: symmetric and asymmetric lags. Appl Econ 31(4):517–524
Zurück zum Zitat Panetta F, Angelini P, Grande G, Levy A, Perli R, Yesin P, Gerlach S, Ramaswamy S, Scatigna M (2006) The recent behaviour of financial market volatility, Bank for International Settlements (BIS), BIS Papers, No 29 Panetta F, Angelini P, Grande G, Levy A, Perli R, Yesin P, Gerlach S, Ramaswamy S, Scatigna M (2006) The recent behaviour of financial market volatility, Bank for International Settlements (BIS), BIS Papers, No 29
Zurück zum Zitat Panetta F, Angelini P et al. (2009) Financial sector pro-cyclicality: lessons from the crisis. Banca d’Italia, Occasional Papers Series, number 44, April 2009 Panetta F, Angelini P et al. (2009) Financial sector pro-cyclicality: lessons from the crisis. Banca d’Italia, Occasional Papers Series, number 44, April 2009
Zurück zum Zitat Shin HS (2010) Risk and liquidity. Oxford University Press, New York Shin HS (2010) Risk and liquidity. Oxford University Press, New York
Zurück zum Zitat Wilson J, Casu B, Girardone C, Molyneux P (2010) Emerging themes in banking: Recent literature and directions for future research. Br Account Rev 42(3):153–169CrossRef Wilson J, Casu B, Girardone C, Molyneux P (2010) Emerging themes in banking: Recent literature and directions for future research. Br Account Rev 42(3):153–169CrossRef
Zurück zum Zitat Yellen JL (2010) Macroprudential supervision and monetary policy in the post-crisis world. Speech at the Annual Meeting of the National Association for Business Economics, Denver, CO, October 11, 2010. Bus Econ 46:3–12. https://doi.org/10.1057/be.2010.35 Yellen JL (2010) Macroprudential supervision and monetary policy in the post-crisis world. Speech at the Annual Meeting of the National Association for Business Economics, Denver, CO, October 11, 2010. Bus Econ 46:3–12. https://​doi.​org/​10.​1057/​be.​2010.​35
Metadaten
Titel
Fuelling fire sales? Prudential regulation and crises: evidence from the Italian market
Publikationsdatum
05.08.2021
Erschienen in
Journal of Economics and Finance / Ausgabe 1/2022
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-021-09558-4

Weitere Artikel der Ausgabe 1/2022

Journal of Economics and Finance 1/2022 Zur Ausgabe

Premium Partner