In an environment of asymmetric information, banks face information externalities due to their role as intermediaries of information. In particular, bank insiders will possess private information from monitoring loan customers. Accordingly, outsiders may interpret changes in a bank's financial policy as signals about the quality of its loan portfolio and to the extent that the assets (loans) of different banks are viewed as similar, they will interpret such signals as pertaining to non-announcing banks as well leading to contagion effects. We test for the presence of contagion effects in stock returns associated with announcements of dividend cuts by money-center banks. We find that dividend cuts induce negative abnormal returns in the stocks of non-announcing money-center banks and to a lesser extent in the stocks of large regional banks. The observed contagion effects appear consistent with informed rather than contagious panic behavior because these effects are systematically related to risks that are common to all affected banks.

We postulate that the announcement effect of dividend reductions should be more severe for banks than for nondashfinancial firms because bank customers may avoid financially weak institutions and discontinue the relationship when negative information is released. To test our hypothesis we investigate a total of 81 dividend reductions by 56 commercial banks listed on the NYSE, AMEX and NASDAQ for the period 1974–1991. We find significant abnormal returns of −8.02% for the two-day event window and − 11.46% for a two-week period. These negative valuation effects are stronger than those reported in studies for dividend reductions of nondashfinancial firms and for other negative bank announcements. We also explore the relationship between abnormal returns and specific bank characteristics cross-sectionally and find a stronger reaction for larger banks.

An essential motive for investing in commodities is to enhance the performance of portfolios traditionally including only stocks and bonds. We analyze the in-sample and out-of-sample portfolio effects resulting from adding commodities to a stock-bond portfolio for commonly implemented asset allocation strategies such as equally- and strategically-weighted portfolios, risk-parity, minimum-variance as well as reward-to-risk timing, mean-variance and Black–Litterman. We analyze different commodity groups such as agricultural and livestock commodities that currently are critically discussed. The out-of-sample portfolio analysis indicates that the attainable benefits of commodities are much smaller than suggested by previous in-sample studies. Hence, in-sample analyses, such as spanning tests, might exaggerate the advantages of commodities. Moreover, the portfolio gains greatly vary between different types of commodities and sub-periods. While aggregate commodity indices, industrial and precious metals as well as energy improve the performance of a stock-bond portfolio for most asset allocation strategies, we hardly find positive portfolio effects for agriculture and livestock. Consequently, investments in food commodities are not essential for efficient asset allocation.