In this thesis I use 240 U.S. commercial bank stocks to analyze their returns from 1999 to 2014. My results show that in the full sample period there is size anomaly among the U.S. commercial banks. Largest banks outperform smallest banks after 5 normal risks are adjusted. The stock price of the largest banks dropped less than that of the smallest banks, especially during the 2007-2010 financial crisis period. This size anomaly is related to the Too-big-to-fail problem, where the U.S. government provides implicit guarantee to the largest banks to protect the financial system during the crisis. The second part of the paper examines the impact of the announcements of the Gramm-Leach-Bliley Act (GLBA),the Emergency Economic Stabilization Act of 2008 (EESA) and Dodd-Frank Act on bank stock returns. The results show that there are positive cumulative abnormal returns to the announcement of GLBA and EESA, and negative cumulative abnormal returns to the passage of Dodd-Frank. The return spread between the largest banks and smallest banks gets wider but not significant with the announcement of the GLBA, and the return spread becomes huge and significant with the Bailout announcement. The return spread is still large and significant with the Dodd-Frank Act announcement. Therefore, I find Dodd-Frank Act is not sufficient to end the Too-big-to-fail problem.
Date of Award | 18 Oct 2016 |
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Original language | English |
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Awarding Institution | - Universidade Católica Portuguesa
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Supervisor | Leon Bogdan Stacescu (Supervisor) |
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Size anomalies in U.S Commercial Bank stock returns
Wu, H. (Student). 18 Oct 2016
Student thesis: Master's Thesis