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Article
Bank insolvency risk and time-varying Z-score measures
Journal of International Financial Markets, Institutions & Money (2013)
  • Laetitia Lepetit
  • Frank Strobel, University of Birmingham
Abstract

We compare the different existing approaches to the construction of time-varying Z-score measures, plus an additional alternative one, using a panel of banks for the G20 group of countries covering the period 1992-2009. We examine which ways of estimating the moments used in these different approaches best fit the data, using a simple root mean squared error criterion. Our results are supportive of our alternative time-varying Z-score measure: it uses mean and standard deviation estimates of the return on assets calculated over full samples combined with current values of the capital-asset ratio, and is thus straightforward to implement.

Keywords
  • insolvency risk,
  • Z-score,
  • time-varying,
  • mean squared error
Disciplines
Publication Date
2013
Citation Information
Laetitia Lepetit and Frank Strobel. "Bank insolvency risk and time-varying Z-score measures" Journal of International Financial Markets, Institutions & Money Vol. 25 (2013)
Available at: http://works.bepress.com/frank_strobel/21/