Model uncertainty and systematic risk in US banking

L.T.M. Baele, Valerie De Bruyckere, O.G. De Jonghe, Rudi Vander Vennet

Research output: Contribution to journalArticleScientificpeer-review

13 Citations (Scopus)
580 Downloads (Pure)


This paper uses Bayesian Model Averaging to examine the driving factors of equity returns of US Bank Holding Companies. BMA has as an advantage over OLS that it accounts for the considerable uncertainty about the correct set (model) of bank risk factors. We find that out of a broad set of 12 risk factors only the market, real estate, and high-minus-low Fama–French factors are reliably related to US bank stock returns over the period 1986–2010. Other factors are either only relevant over specific subperiods or for subsets of bank holding companies. We discuss the implications of our findings for empirical banking research.
Original languageEnglish
Pages (from-to)49-66
JournalJournal of Banking & Finance
Publication statusPublished - Apr 2015


  • Bayesian model average
  • bank risk
  • systematic risk
  • bank stock returns
  • bank supervision
  • fi…nancial stability


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