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Impact of Deposit-Rate Ceiling Changes on Bank Stock Returns

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  • Unal, Haluk

Abstract

This paper reexamines the impact of four major changes in deposit-rate ceilings that occurred during the 1970-80 decade on bank systematic and unsystematic risk. The reexamination clarifies why it is dangerous to conduct event studies naively. Stephen M. Goldfeld and Richard E. Quandt's switching-regressions method is proposed as a procedure that forces the researcher to take a more disciplined approach to determining event dates. Contrary to previous studies, switch dates identified by Goldfeld and Quandt's switching-regressions method cannot be associated with ceiling-change announcements because of other information flows, so that inferences cannot be drawn about the specific effects of the regulatory adjustments. Copyright 1989 by Ohio State University Press.

Suggested Citation

  • Unal, Haluk, 1989. "Impact of Deposit-Rate Ceiling Changes on Bank Stock Returns," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 206-220, May.
    • Handle: RePEc:mcb:jmoncb:v:21:y:1989:i:2:p:206-20
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    Cited by:

    1. Waheed, Amjad & Mathur, Ike, 1995. "Wealth effects of foreign expansion by U.S. banks," Journal of Banking & Finance, Elsevier, vol. 19(5), pages 823-842, August.
    2. Jayanti, S. V. & Whyte, Ann Marie & Quang Do, A., 1996. "Bank failures and contagion effects: Evidence from Britain and Canada," Journal of Economics and Business, Elsevier, vol. 48(2), pages 103-116, May.
    3. E. James Cowan & Karen C. Denning & Anne Anderson & Xiaohui Yang, 2018. "Divergent Market Responses to Human Capital Reorganizations," Business and Economic Research, Macrothink Institute, vol. 8(1), pages 212-243, March.
    4. Susan Ryan & Andrew C. Worthington, 2002. "Time-Varying Market, Interest Rate and Exchange Rate Risk in Australian Bank Portfolio Stock Returns: A Garch-M Approach," School of Economics and Finance Discussion Papers and Working Papers Series 112, School of Economics and Finance, Queensland University of Technology.
    5. Brooks, Robert D. & Faff, Robert W. & Yew, Kee Ho, 1997. "A new test of the relationship between regulatory change in financial markets and the stability of beta risk of depository institutions," Journal of Banking & Finance, Elsevier, vol. 21(2), pages 197-219, February.
    6. Dennis, Steven A. & Jeffrey, Andrew, 2002. "Structural changes in Australian bank risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(1), pages 1-17, February.
    7. Schinski, Michael & Mullineaux, Donald, 1995. "The impact of the Federal Reserve's source of strength policy on bank holding companies," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(35), pages 483-496.
    8. Karen C. Denning & Heather Hulburt & Stephen P. Ferris, 2006. "Risk and wealth effects of U.S. firm joint venture activity," Review of Financial Economics, John Wiley & Sons, vol. 15(3), pages 271-285.
    9. Denning, Karen C. & Hulburt, Heather & Ferris, Stephen P., 2006. "Risk and wealth effects of U.S. firm joint venture activity," Review of Financial Economics, Elsevier, vol. 15(3), pages 271-285.

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