The Relation between Liquidity Risk and the Stock Returns during the Financial Crisis: An Examination Using the Three types of Securitized Loans
Date Issued
2010
Date
2010
Author(s)
Chu, Yu-Fang
Abstract
Securitization has been the main activity in many bank holding companies. According to the prior literature, some risks of the off-balance sheet securitized loans are retained on the originator through retained interests that are evaluated by many parameters, leading to higher estimation risks and increasing the uncertainty of the originator’s value, which implies that the information qualities are poor and thus influences the firm’s liquidity risk and stock price.
Since during the financial crisis period, there are many liquidity-related events, I investigate the association between the stock return and liquidity risk by examining if the three off-balance sheet banks’ loan securitizations reflecting information quality and liquidity risk are relevant to investors due to the estimation risks and uncertainty of retained interests on the originator. In addition, there are differences in the externally verifiable credit risk, retained risks and information qualities of three loan types of off-balance sheet ABS, so I further assume that the associations between the investors’ reaction and the three loan types are different.
Subjects
securitizations
retained interests
information quality
liquidity risk
financial crisis
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ntu-99-R97722012-1.pdf
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