DIDMCA AND BANK MARKET RISK - THEORY AND EVIDENCE

This paper examines the theoretical and empirical consequences of the Depository institutions Deregulation and Monetary Control Act of 1980 on the market risk of the US banking industry. We survey several theoretical arguments linking deregulation of deposit interest rates to market-based measures of bank risk. Capital market data for a sample of large commercial bank holding companies provides evidence that deregulation has accompanied increases in both systematic and nonsystematic measures of bank risk.