Thesis_gd_final_vers.. - Vernimmen

models 1, 2 and 3, exposure to real estate loans or any other class is not per se a determinant of
failure because the asset allocation remains the same overtime at both failed and safe banks. This is
the combination of asset allocation choices and of end of the real estate bubble which may have
been a determinant of failure. We expect that our new variables will capture the combination of
these two factors. We create models 2b and 3b based respectively on models 2 and 3 and to which
we add the new combined variables whenever the original variable is used in the model. We find
that if exposure to real estate loans is strongly decreasing failure likelihood prior to the crisis based
on the coefficient of the variable re_lo, it changes much with the crisis. The coefficient on
re_lo_cr is positive and significantly different from zero, which indicates that the exposure to real
estate loans at the time of the crisis increases failure probability. We could test our combination on
other asset variables to verify to what extent the combination of exposure to an asset class during
the crisis increases failure probability. The results from model 3b are mixed. Even though they are
not statistically different from zero at a high enough confidence level the coefficients on
com_re_lo and com_re_lo_cr show that the combination of the crisis and of exposure to
Table 14: Measure of in-sample prediction accuracy
Model 1 Model 2 Model 2b
Decile % of failed cum. % of failed % of failed cum. % of failed % of failed cum. % of failed
1 94.3% 94.3% 93.6% 93.6% 96.4% 96.4%
2 3.6% 97.9% 2.1% 95.7% 1.4% 97.9%
3 0.7% 98.6% 2.1% 97.9% 0.7% 98.6%
4 0.7% 99.3% 0.7% 98.6% 0.7% 99.3%
5 0.7% 100.0% 1.4% 100.0% 0.0% 99.3%
6 0.0% 100.0% 0.0% 100.0% 0.7% 100.0%
7 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
8 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
9 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
10 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
Model 3 Model 3b Model 4
Decile % of failed cum. % of failed % of failed cum. % of failed % of failed cum. % of failed
1 96.4% 96.4% 96.4% 96.4% 96.4% 96.4%
2 1.4% 97.9% 1.4% 97.9% 1.4% 97.9%
3 0.7% 98.6% 0.7% 98.6% 0.7% 98.6%
4 0.0% 98.6% 0.0% 98.6% 0.0% 98.6%
5 1.4% 100.0% 1.4% 100.0% 0.0% 98.6%
6 0.0% 100.0% 0.0% 100.0% 0.7% 99.3%
7 0.0% 100.0% 0.0% 100.0% 0.0% 99.3%
8 0.0% 100.0% 0.0% 100.0% 0.7% 100.0%
9 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
10 0.0% 100.0% 0.0% 100.0% 0.0% 100.0%
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