Bank Business Models at Zero Interest Rates

André Lucas*, Julia Schaumburg, Bernd Schwaab

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We propose a novel observation-driven finite mixture model for the study of banking data. The model accommodates time-varying component means and covariance matrices, normal and Student’s t distributed mixtures, and economic determinants of time-varying parameters. Monte Carlo experiments suggest that units of interest can be classified reliably into distinct components in a variety of settings. In an empirical study of 208 European banks between 2008Q1–2015Q4, we identify six business model components and discuss how their properties evolve over time. Changes in the yield curve predict changes in average business model characteristics.

Original languageEnglish
Pages (from-to)542-555
Number of pages14
JournalJournal of Business and Economic Statistics
Volume37
Issue number3
DOIs
Publication statusPublished - 2019

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