Optimal equity capital requirements for large Swiss banks

Swiss Journal of Economics and Statistics

Table 1 Bank equity beta and bank leverage

	Linear	Log-linear	Linear	Log-linear	Linear	Log-linear
Frequency	Quarterly	Quarterly	Quarterly	Quarterly	Quarterly	Quarterly
Time period	2001Q2–2015Q2	2001Q2–2015Q2	2001Q2–2009Q4	2001Q2–2009Q4	2010Q2–2015Q2	2010Q2–2015Q2
No. of observations	57	57	35	35	21	21
Bank effect	Fixed	Fixed	Fixed	Fixed	Fixed	Fixed
F-statistics	12.2225^***	17.7367^***	9.5651^***	15.1629^***	4.5103^**	4.9486^**
Time effect	Fixed	Fixed	Fixed	Fixed	Random	Random
F-statistic	5.7657^***	5.7033^***	5.5793	15.1629^***	–	–
a (constant)	0.8269^*** (0.1605)	− 1.5512^*** (0.4225)	0.6778^*** (0.2148)	− 1.7322^*** (0.5025)	0.6753^** (0.3093)	− 1.7731^** (0.7218)
b	0.01754^** (0.003904)	0.5340^*** (0.1157)	0.01832^*** (0.00471)	0.5551^*** (0.1157)	0.02920^*** (0.01007)	0.6487^*** (0.2188)
t statistic H0: b = 1	–	4.0277^***	–	3.8543^***	–	1.6056
Adj. R-squared	0.7132	0.7132	0.7001	0.6903	0.1031	0.1437
Hausman test	5.0166^**	7.3111^***	4.8945^**	8.6245^***	2.4799	2.0465
Mean beta	1.54		1.57		1.49
Mean leverage	40.38		48.47		27.18
Gauging the M-M effect of the linear regression	0.460		0.566		0.533

Note: ^*,^**,^***Significance at the 5%, 1%, and 0.1% level, respectively (null hypothesis for t statistics: b = 0, a = 0). Standard errors are given in parentheses. Definition and sources: The beta estimates for Credit Suisse and UBS are obtained by regressing each quarter of the bank’s daily stock returns on the daily return of the Swiss performance Index (SPI). Daily closing prices for the banks and the SPI are obtained from FactSet. Leverage is defined as the ratio of balance sheet to BIS Tier 1 capital. Balance sheet assets and BIS Tier 1 capital are collected from Bloomberg and the bank’s quarterly reports at group level