Board of Governors of the Federal Reserve System

Notes: Each panel shows the additional cumulative excess return at quarterly horizon $$t+h$$ for a specific asset class predicted by a standard deviation increase in a given NYCH bank balance sheet variable at time $$t$$: year-over-year cash reserve growth for stocks (Panel (a)) or year-over-year loan-to-deposit ratio growth for bonds (Panel (b)). Estimates are based on a regression of cumulative excess returns at quarter $$t+h$$ on the NYCH bank balance sheet growth variable and controls for year-over-year real GNP growth, one-quarter excess return, dividend yield, and earnings-to-price ratio all measured at quarter $$t$$. Dashed lines are 90% confidence bands computed using Hodrick (1992) standard errors.

Notes: Each panel shows the additional cumulative excess return at quarterly horizon $$t+h$$ for stocks (Panels (a) and (b)) or bonds (Panels (c) and (d) predicted by a standard deviation increase in either NYCH “bankers’ banks" year-over-year loan-to-deposit ratio growth or all other NYCH banks’ year-over-year loan-to-deposit ratio growth at time $$t$$. Estimates are based on a regression of cumulative excess returns at quarter $$t+h$$ on NYCH bankers’ bank and other NYCH banks’ year-over-year loan-to-deposit ratio growth, year-over-year real GNP growth, dividend yield, earnings-price ratio, and one quarter excess return, all measured at quarter $$t$$ and split into “below" and “above" versions of original variables. “Below" versions take their actual value when NYCH bankers’ banks’ reserve-deposit ratio is below its sample median and zero otherwise, while “above" versions take their actual value when NYCH bankers’ banks’ reserve-deposit ratio is above its sample median and zero otherwise. Plotted effects are for the “below" versions of bankers’ bank and other bank loan-to-deposit ratio growth. Dashed lines are 90% confidence bands computed using Hodrick (1992) standard errors.

Notes: Each panel shows the additional cumulative excess return at quarterly horizon $$t+h$$ for stocks (Panels (a) and (b)) or bonds (Panels (c) and (d)) predicted by a standard deviation increase in a given NYCH bank balance sheet variable at time $$t$$: year-over-year cash reserve growth or year-over-year loan-to-deposit ratio growth. Estimates are based on a regression of cumulative excess returns at quarter $$t+h$$ on the NYCH bank balance sheet growth variable and controls for year-over-year real GNP growth, one-quarter excess return, dividend yield, and earnings-to-price ratio all measured at quarter $$t$$ with every variable split into “below" and “above" versions. “Below" variables are their actual values when NYCH banks’ reserve-deposit ratio is below its sample median and zero otherwise, while “above" variables are their actual values when NYCH banks’ reserve-deposit ratio is above its sample median and zero otherwise. Panels (a) and (c) report effects for “below" versions of NYCH bank balance sheet variables. Panels (b) and (d) report effects for “above" versions of NYCH bank balance sheet variables. Dashed lines are 90% confidence bands computed using Hodrick (1992) standard errors.

Notes: Each panel shows the additional cumulative excess return at quarterly horizon $$t+h$$ for British stocks predicted by a standard deviation increase in a given NYCH bank balance sheet variable at time $$t$$: year-over-year cash reserve growth (Panel (a)) or year-over-year loan-to-deposit ratio growth (Panel (b)). Estimates are based on regressions of cumulative excess returns for British equities at $$t+h$$ on the NYCH bank balance sheet variable, year-over-year growth in real British bank clearings, the dividend yield for British stocks, and the one-quarter excess return for British equities all measured at quarter $$t$$. Dashed lines are 90% confidence bands computed using Hodrick (1992) standard errors.