Finance

Business

Financial crisis

Fragility

Macroeconomics

Boom

Engineering

Bubble

Systemic risk

Parallel computing

Physical chemistry

Economics

Chemistry

Economic bubble

Bust

Computer science

Monetary economics

Financial system

Computer security

Asset (computer security)

Real estate

Environmental engineering

Review of Financial Studies

We analyze the relationship between asset price bubbles and systemic risk, using bank-level data covering almost 30 years. Banks’ systemic risk already rises during a bubble’s buildup and even more so during its bust. The increase in risk strongly differs across banks and by bubble. It depends on bank characteristics (especially bank size) and bubble characteristics and can become very large: in a median real estate bust, systemic risk increases by almost 70% of the median for banks with unfavorable characteristics. These results emphasize the importance of bank-level factors in the buildup of financial fragility during bubble episodes. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Asset Price Bubbles and Systemic Risk