Bank diversification: laws and fallacies of large numbers
Abstract: Conventional wisdom on bank diversification confuses risk with failure. This article clarifies the distinction and shows how increasing bank size may increase bank risk, even though it lessens the probability of failure and lowers the expected loss. The key result is an application of Samuelson's \"fallacy of large numbers.\"
File(s): File format is text/html http://www.clevelandfed.org/research/review/1998/98-q2-haubrich.pdf
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Review
Publication Date: 1998
Issue: Q II