HKS Affiliated Authors
Frank and Denie Weil Director of the Mossavar-Rahmani Center for Business and Government
Charles W. Eliot University Professor
Excerpt
Excerpt
Have big banks gotten safer? Lawrence Summers, September 15, 2016, Paper, "Since the financial crisis, there have been major changes in the regulation of large financial institutions directed at reducing their risk. Measures of regulatory capital have substantially increased; leverage ratios have been reduced; and stress testing has sought to further assure safety by raising levels of capital and reducing risk taking. Standard financial theories would predict that such changes would lead to substantial declines in financial market measures of risk. For major institutions in the United States and around the world and midsized institutions in the United States, we test this proposition using information on stock price volatility, option-based estimates of future volatility, beta, credit default swaps, earnings-price ratios, and preferred stock yields." Link