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Directional predictability between interest rates and the Stoxx 600 Banks index: A quantile approach

Author

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  • Joaqui-Barandica, Orlando
  • Oviedo-Gómez, Andres
  • Manotas-Duque, Diego F.

Abstract

This paper examines the relationship between the World Interest Rate (WIR) and the Stoxx 600 Banks index (SX7P) using a quantile approach and cross-quantilogram. The results reveal that the Stoxx 600 Banks index strongly predicts the WIR when its index is low, and the WIR significantly influences the SX7P when it is high. The study demonstrates that during a global crisis, the Stoxx 600 Banks index receives shocks, while the WIR acts as a transmitter. The study provides valuable insights into the cyclical pattern and complex relationship between WIR and SX7P, benefiting policymakers, investors, and financial analysts.

Suggested Citation

  • Joaqui-Barandica, Orlando & Oviedo-Gómez, Andres & Manotas-Duque, Diego F., 2023. "Directional predictability between interest rates and the Stoxx 600 Banks index: A quantile approach," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323007006
    DOI: 10.1016/j.frl.2023.104328
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    More about this item

    Keywords

    Cross-quantilogram; Developed economies; Systemic risk; Quantile vector autoregression;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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