Corpus ID: 5970794

Modeling of Banking Profit via Return-on-Assets and Return-on-Equity

  title={Modeling of Banking Profit via Return-on-Assets and Return-on-Equity},
  author={M. A. Petersen and I. L. Schoeman},
  • M. A. Petersen, I. L. Schoeman
  • Published 2008
  • Economics
  • In our contribution, we model bank profitabil- ity via return-on-assets (ROA) and return-on-equity (ROE) in a stochastic setting. We recall that the ROA is an indication of the operational efficiency of the bank while the ROE is a measure of equity holder returns and the potential growth on their invest- ment. As regards the ROE, banks hold capital in order to prevent bank failure and meet bank capital requirements set by the reg- ulatory authorities. However, they do not want to hold too much… CONTINUE READING
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