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Comment: A Test of Stone's Two-Index Model of Returns

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  • Chance, Don M.

Abstract

In a recent article Lloyd and Shick [3] examined a two-index model of bank stock returns with interest rates as the extra-market source of covariance. Based on their findings, the authors were optimistic that the inclusion of an interest rate index would prove to be worthwhile in market model regressions. The purpose of this comment is to question their conclusions by pointing out some specific deficiencies concerning their data, the statistical tests, and their interpretation of the results.

Suggested Citation

  • Chance, Don M., 1979. "Comment: A Test of Stone's Two-Index Model of Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(3), pages 641-644, September.
    • Handle: RePEc:cup:jfinqa:v:14:y:1979:i:03:p:641-644_00
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    Cited by:

    1. 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.
    2. Jill L. Wetmore & John R. Brick, 1994. "Commercial Bank Risk: Market, Interest Rate, And Foreign Exchange," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(4), pages 585-596, December.

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