We decom­po­se bank acti­vi­ties into pas­si­ve and acti­ve com­pon­ents and eva­lua­te the per­for­mance of the acti­ve com­pon­ents of the bank busi­ness model by con­trol­ling for pas­si­ve matu­ri­ty trans­for­ma­ti­on stra­te­gies that can be exe­cu­t­ed in the capi­tal mar­ket. Over the peri­od 1960–2016, we find that (1) unle­ve­r­ed bank assets under­per­form pas­si­ve port­fo­li­os of matu­ri­ty-matched U.S. Tre­a­su­ry bonds; (2) the cost of bank depo­sits exceeds the cost of bank debt; (3) bank equi­ties have CAPM betas near one, while pas­si­ve matu­ri­ty trans­for­ma­ti­on stra­te­gies have CAPM betas near zero; and (4) port­fo­li­os of bank equi­ties con­sist­ent­ly under­per­form port­fo­li­os desi­gned to pas­si­ve­ly mimic their eco­no­mic expo­sures. The very strong invest­ment per­for­mance of pas­si­ve matu­ri­ty trans­for­ma­ti­on stra­te­gies over this peri­od may mask the under­per­for­mance of the spe­cia­li­zed bank activities.

Quel­le /​ Link: Do Banks Have an Edge?

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