Asset price bubbles and systemic risk

Markus Brunnermeier, Simon Rother, Isabel Schnabel

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

We analyze the relationship between asset price bubbles and systemic risk, using bank-level data covering almost 30 years. Banks’ systemic risk already rises during a bubble’s buildup and even more so during its bust. The increase in risk strongly differs across banks and by bubble. It depends on bank characteristics (especially bank size) and bubble characteristics and can become very large: in a median real estate bust, systemic risk increases by almost 70% of the median for banks with unfavorable characteristics. These results emphasize the importance of bank-level factors in the buildup of financial fragility during bubble episodes.

Original languageEnglish (US)
Pages (from-to)4272-4317
Number of pages46
JournalReview of Financial Studies
Volume33
Issue number9
DOIs
StatePublished - Sep 1 2020

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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