Featured paper of the day: Banks and securities markets

"The evolving importance of banks and securities markets" (Demirguc-Kunt, Feyen, Levine)

This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an increase in economic output and an increase in bank development becomes smaller, and (3) the association between an increase in economic output and an increase in securities market development becomes larger. The results are consistent with theories predicting that as economies develop, the services provided by securities markets become more important for economic activity, while those provided by banks become less important.

Nice paper using quantile regression techniques. (I wish I could have written this for work!) At least now I have a greater appreciation of the applications of quantile regression in finance.