Value relevance of unrealised gains and losses on non-agency securities

Abstract

In this paper I examine the value relevance of unrealised gains/losses on non-agency securities owned by bank holding companies and how this valuation property may have changed in the recent crisis period. I find value relevance of these unrealised changes, but only in the crisis period. This implies that market investors consider these fair value revaluations useful despite concerns about their reliability as banks are more likely to liquidate these securities in the crisis period. A stronger relation between the unrealised changes and future-realised gains/losses in the crisis period provides economic rationale to the value relevance during this period.