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Interest rate sensitivity of the European stock markets before and after the euro introduction

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  • Korkeamäki, Timo
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    Abstract

    Introduction of the euro altered corporate financing markets for the euro zone firms in an unprecedented way. Since 1999, firms from the euro zone countries are able to raise funds in their home currency in the large common currency market. I find that while stock returns in most countries in the Western Europe were negatively correlated with interest rate changes prior to the euro, that correlation has disappeared since 1999. My results reveal that recent growth in European corporate bond markets has played an important role in enabling firms to better manage their interest rate risk.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1042443111000400
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 21 (2011)
    Issue (Month): 5 ()
    Pages: 811-831

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    Handle: RePEc:eee:intfin:v:21:y:2011:i:5:p:811-831

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    Web page: http://www.elsevier.com/locate/intfin

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    Keywords: Interest rate risk; Euro;

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