Harald Benink

Survey data and the interest rate sensitivity of US bank stock returns

In this paper, we provide empirical evidence on the interest rate sensitivity of the stock returns of the twenty largest US bank holding companies. The main contribution of the paper is the use of survey data to model the unexpected interest rate variable, which is an alternative approach to the existing literature. We find evidence of significant negative interest rate sensitivity during the early 1980s, and evidence of declining significance in the late 1980s and early 1990s. This result is also obtained when using the forecast errors of ARIMA processes to model the unexpected movement in the interest rate.

An exploration of Neo-Austrian theory applied to financial markets

We attempt to translate Neo-Austrian ideas about the workings of financial markets, as originally advanced by F. A. Hayek, into the standard probabilistic language of modern finance. We focus on an apparent paradox, namely the insistence of Neo-Austrians on order (i.e., stationarity) together with ever-reemerging inefficiencies. The papers findings have implications beyond Neo-Austrian theory: They demonstrate how easy it is to reject market efficiency, but how much more difficult it is to discern the nature of the inefficiency. We illustrate our findings with price data from the U.S. Treasury bill market over the period 1962 to 1999. There is ample evidence that the price of a three-month Treasury bill is not a random walk, yet the sign of the average price change is erratic, so that inference about the nature of the inefficiency is unreliable.

Europe’s Single Banking Market

This article provides an overview of the main principles underlying the regulatory for banks in Europe.

A New Measure of Market Inefficiency

An oft stated corrollary, sometimes taken as its definition, of the Efficient Markets Hypothesis is that in an efficient market it should not be possible to systematically make excess or abnormal returns. This begs the question of excess or abnormal relative to what? Traditional benchmarks either fail to distinguish between trading returns and market returns, or are dependent on an associated asset pricing model, thus leading to the joint-hypothesis problem. In this paper we discuss a purely empirical measure - Excess Trading Returns - derived from the difference in profits associated with an agent portfolio where one or more trades were executed relative to a Buy-and-Hold portfolio where they were not, the Buy-and-Hold benchmark being dynamic and/or unique to the agent. With this measure in hand we introduce the relative inefficiency associated with a pair of agents, agent groups or trading strategies and from this define an Inefficiency Matrix that can provide a complete empirical characterization of the inefficiencies inherent in an entire market.

Das European Shadow Financial Regulatory Committee: Ein Beitrag zur Regulierungskultur in Europa

Abstract The turbulence in the international financial markets in the 1980s inspired the idea that independent academics might be in a position to make a contribution to the improvement of regulation and thus ultimately also to the stability of the national financial sector in the United States. This led to the creation of the US “Shadow Financial Regulatory Committee“, a group of academics and other independent experts working in the field of financial regulation, which meets regularly and issues statements concerning conceptual as well as current issues in financial regulation. Two years ago, a similar shadow committee was founded in Europe. It is composed of members from 11 different countries. The special problems of financial regulation in Europe, as well as the special features of the European Shadow Financial Regulatory Committee (ESFRC), derive from the fact that despite the trend towards economic and political integration, Europe is still a collection of different nations with different institutional set-ups and political and economic traditions. In this paper, Harald Benink, chairman of the ESFRC, and Reinhard H. Schmidt, one of the two German members, describe the origin, the objectives and the functioning of the committee and the thrust of its recommendations.