Is Bank Failure a Risk to the Equity Market?
Economic Computation and Economic Cybernetics Studies and Research, vol.58, no.1, pp.314-327, 2024 (SCI-Expanded, SSCI, Scopus)
- Publication Type: Article / Article
- Volume: 58 Issue: 1
- Publication Date: 2024
- Doi Number: 10.24818/18423264/58.1.24.20
- Journal Name: Economic Computation and Economic Cybernetics Studies and Research
- Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Business Source Elite, Business Source Premier, EconLit, INSPEC, zbMATH
- Page Numbers: pp.314-327
- Keywords: bank collapse, causal inference, conflict, counterfactual prediction, stock market
- Open Archive Collection: AVESIS Open Access Collection
- Istanbul University Affiliated: Yes
Abstract
This paper analyses the effect of the Silicon Valley Bank collapse on different sectors of U.S. equities based on forecasting counterfactual market responses. The findings suggest that bank collapse has a negative impact on the US equities. The results indicate rapid divergence from counterfactual predictions, and the actual equities are consistently lower than expected in the absence of collapse. The pointwise causal effect displays an estimate of the equities that fall following the collapse. In relative terms, these equities decreased between-3% and-10%. Moreover, the intervention's causal effect estimations indicate that the impact is particularly significant for the real estate, financial, and consumer discretionary sectors. As a result, investors and policymakers should enhance their regulatory structure, investigate cutting-edge technologies, build an early warning system, and seek social media's role in predicting bank runs.