Abstract
We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across sectors, with end effects on state-level volatility. The change cannot be explained simply by shifts in sector-level returns and volatility. A reallocation effect is at play, which we study in the context of mean-variance portfolio theory applied to sectoral returns. We find the reallocation is particularly strong in sectors characterized by young, small and external finance dependent firms, and for states that have a larger share of such sectors. The findings suggest that improving bank access to branching affects the sectoral specialization of output, in a manner that depends on the variance-covariance properties of sectoral returns, rather than on their average only.
Original language | English (US) |
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Pages (from-to) | 135-172 |
Number of pages | 38 |
Journal | Review of Finance |
Volume | 15 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2011 |
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics