Innovations and the portfolios of weekly reporting banks

Abstract

This paper examines changes in portfolios of domestic offices of large banks in the United States. Empirical evidence indicates that representative portfolios changed by statistical significant amounts because of improved cash management, broadening of the federal funds market, more sophisticated tax avoidance, and new financial instruments. Changes over the years 1970–1976 were analyzed by examining the distribution of mean portfolio shares, performing a canonical correlation study, and examining the stationarity of a portfolio model that is described in The Econometrics of Panel Data, Annales de l'insee, April–September, 1978, pp. 297–329. The final section interprets the findings for the design of monetary policy.