Portfolio Analysis of Asset and Liability Management in Small-, Medium-, and Large-Sized Banks

Journal of Monetary Economics, August 1978, Volume 4, Number 3, pages 459-480

22 Pages Posted: 8 May 2015

See all articles by Jack Clark Francis

Jack Clark Francis

Zicklin School of Business, Baruch College

Date Written: August 1, 1978

Abstract

The paper presents an analysis of the commercial banking firm based on Markowitz portfolio analysis. A bank is treated as a portfolio of five banking assets and three banking liabilities. The average return and risk of each category is estimated empirically for three groups of banks categorized by size - small, medium, and large banks. Bank rates of return on equity are defined as the weighted average of the assets' rates of return less the weighted average of the liabilities rates of return. Quadratic Programming (QP) is used to delineate the set of efficient banking portfolios, which each have the maximum rate of return on equity at each level of equity risk.

Keywords: Commercial banking firm, Markowitz portfolio analysis, banking assets, banking liabilities, efficient frontier,

Suggested Citation

Francis, Jack Clark, Portfolio Analysis of Asset and Liability Management in Small-, Medium-, and Large-Sized Banks (August 1, 1978). Journal of Monetary Economics, August 1978, Volume 4, Number 3, pages 459-480, Available at SSRN: https://ssrn.com/abstract=2603722

Jack Clark Francis (Contact Author)

Zicklin School of Business, Baruch College ( email )

One Bernard Baruch Way
New York, NY 10010
United States
646-312-3462 (Phone)

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