Comovements in the Prices of Securities Issued by Large Complex Financial Institutions

Abstract

In recent years, mergers, acquisitions and organic growth have meant that some of the largest and most complex financial groups have come to transcend national boundaries and traditionally defined business lines. As a result, they have become a potential channel for the cross-border and crossmarket transmission of financial shocks. This paper analyses the degree of comovement in the prices of securities issued by a selected group of large complex financial institutions (LCFIs), and assesses the extent to which movements in the prices of these securities are driven by common factors. A relatively high degree of commonality is found for most LCFIs (compared to a control group of nonfinancials), although there are still noticeable divisions between sub-groups of LCFIs, both according to geography and primary business-line.