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Interest Rate Changes And Common Stock Returns Of Financial Institutions: Revisited

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  • Sung C. Bae

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.

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  • Sung C. Bae, 1990. "Interest Rate Changes And Common Stock Returns Of Financial Institutions: Revisited," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 13(1), pages 71-79, March.
    • Handle: RePEc:bla:jfnres:v:13:y:1990:i:1:p:71-79
    DOI: 10.1111/j.1475-6803.1990.tb00537.x
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