Performance and Risk in STOXX 600 Banks

Abstract

This study examines the stock performance of large and small European banks included in the STOXX 600 Banks index in response to three major macroeconomic shocks the COVID-19 pandemic, the Russian invasion of Ukraine, and the collapse of Silicon Valley Bank. Employing daily bank stock returns and an event study framework, the analysis measures immediate market reactions through abnormal returns, while subsequent shifts in equity performance are evaluated using volatility, Sharpe ratios, and beta coefficients. The results suggest that large banks tend to exhibit more pronounced short-term losses during shocks compared to smaller banks. In contrast, small banks generally outperform in the medium term following these events, achieving higher risk-adjusted returns despite elevated volatility. Both segments experience increased market correlation and volatility during periods of disruption, indicating heightened systemic risk. Moreover, the type of shock plays a crucial role, with smaller banks often showing greater resilience to localized and geopolitical shocks.

Keywords: {'name': 'Stock Returns'}, {'name': 'Risk-adjusted returns'}, {'name': 'STOXX 600 Banks'}, {'name': 'Macroeconomic shocks'}, {'name': 'Systemic risk'}

Authors & affiliations

Adam Cernohorsky
Affiliation not supplied

Oskar Crnadak
Affiliation not supplied

Petr Budinsky
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

No reference list supplied.