Conventional wisdom in banking argues that diversification tends to reduce bank risk and improve performance, but the … to benefit more from being diversified. This analysis provides important strategic and policy implications for bank …

The largest commercial bank stocks, ranked by total size of the balance sheet, have significantly lower risk …-adjusted returns than small- and medium-sized bank stocks, even though large banks are significantly more levered. We uncover a size … factor in the component of bank returns that is orthogonal to the standard risk factors, including small-minus-big, which has …

The largest commercial bank stocks, ranked by total size of the balance sheet, have significantly lower risk …-adjusted returns than small- and medium-sized bank stocks, even though large banks are significantly more levered. We uncover a size … factor in the component of bank returns that is orthogonal to the standard risk factors, including small-minus-big, which has …

"We use bank stock returns to develop an ex-ante measure of the distortion created by the implicit collective guarantee ….S. commercial banks and short in the smallest banks is nearly minus 8% compared to a portfolio of non-bank stocks and bonds with the …, this long-short portfolio of bank stocks rallies during recessions, when the probability of a financial disaster increases …