Title

The long-term risk effects of the Gramm-Leach-Bliley Act (GLBA) on the financial services industry.

SelectedWorks Author Profiles:

Sridhar Sundaram

Document Type

Book Chapter

Publication Date

2007

ISSN

1569-3732

Abstract

We examine whether systematic risk of the financial services industry (banks, finance, insurance, and real-estate sectors) declined after the passage of GLBA. This study differs from prior work in that we examine changes over a long period of time (5 years before and 5 years after the Act) and we use the Carhart (1997) four-factor model for assessing changes in risks. The study finds that banks, insurance, finance, and real-estate segments load on the market, size, and value factors before as well as after GLBA (the real-estate segment loads on the value factor only after GLBA). Except for finance companies, betas decline significantly for all the other segments after the GLBA. In the case of banks even their loadings on the size and value factors decline after the GLBA, while in the case of finance and real-estate companies the loadings on the momentum factor exhibits reduction in risk after the Act. Overall, the GLBA had a risk reducing impact on the financial services industry.

Comments

Series: Advances in Financial Economics, v.12

Language

en_US

Publisher

Emerald

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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