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INTEREST RATE CHANGES AND COMMON STOCK RETURNS OF FINANCIAL INSTITUTIONS: REVISITED

INTEREST RATE CHANGES AND COMMON STOCK RETURNS OF FINANCIAL INSTITUTIONS: REVISITED In this paper the interest rate sensitivity of common stock returns of financial firms is re‐examined. Considered here are (1) current, anticipated, and unanticipated changes in interest rates; (2) depository and nondepository firms; and (3) three different‐maturity interest rate indices. Results lend strong support for a negative effect of both current and unanticipated interest rate changes. Although some exceptions are observed, stock returns of most subsectors of both financial and nonfinancial firms are not sensitive to anticipated interest rate changes. The findings of this study are robust to the choice of a particular model of interest rate expectations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Financial Research Wiley

INTEREST RATE CHANGES AND COMMON STOCK RETURNS OF FINANCIAL INSTITUTIONS: REVISITED

The Journal of Financial Research , Volume 13 (1) – Mar 1, 1990

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References (11)

Publisher
Wiley
Copyright
© The Southern Finance Association and the Southwestern Finance Association
ISSN
0270-2592
eISSN
1475-6803
DOI
10.1111/j.1475-6803.1990.tb00537.x
Publisher site
See Article on Publisher Site

Abstract

In this paper the interest rate sensitivity of common stock returns of financial firms is re‐examined. Considered here are (1) current, anticipated, and unanticipated changes in interest rates; (2) depository and nondepository firms; and (3) three different‐maturity interest rate indices. Results lend strong support for a negative effect of both current and unanticipated interest rate changes. Although some exceptions are observed, stock returns of most subsectors of both financial and nonfinancial firms are not sensitive to anticipated interest rate changes. The findings of this study are robust to the choice of a particular model of interest rate expectations.

Journal

The Journal of Financial ResearchWiley

Published: Mar 1, 1990

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