Stock Market, Interest Rate and Exchange Rate Risk Effects on non Financial Stock Returns During the Financial Crisis

This study seeks to investigate the sensitivity of stock returns to exchange rate, interest rate and oil price volatility in the Gulf Cooperation Council (GCC) countries. It employs both the multivariate ordinary least square (OLS) regression and the exponential generalized autoregressive conditional heteroscedastic in mean (EGARCH-M) models to analyse the data collected from Bloomberg and DataStream on the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) for the period January 2007 to June 2012. The study shows that stock returns in GCC countries are influenced by the exchange rate risk, interest rate risk and oil price risk. However, the exposure is highest for exchange rate risk and lowest for interest rate risk. While the effects of these risks were mixed, overall, exchange rate risk and oil price risk showed a positive and significant relationship as compared to the interest rate risk that showed a negative significant effect on firm values. The level of the effect of these risks also differed from country to country. Further, foreign operations and firm size had a significant influence on the extent of the firms’ exposure to all three risks. The study findings suggest that the volatility of stock returns affected by changes in the risk factors could indicate non-prioritisation of risk management by firms. This has implications in terms of consideration of the long-term exposure of firms to these three risks and thus, the need for effective risk management strategies.

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Bank Risk Factors and Changing Risk Exposures in the Pre- and Post-financial Crisis Periods: An Empirical Study for India

Management and Labour Studies ◽

10.1177/0258042x17733396 ◽

2017 ◽

Vol 42 (4) ◽

pp. 356-378

Author(s):

Sanjay Sehgal ◽

Tarunika Jain Agrawal

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Financial Crisis ◽

Private Sector ◽

Banking Industry ◽

Risk Exposure ◽

Exchange Rate Risk ◽

Time Varying ◽

Equity Risk ◽

Rate Risk

In this study, we measure and analyse the time-varying nature of risk exposures for the Indian banking industry using weekly bank-level data from 23 October 2004 to 1 August 2014. We extend the literature by studying credit, equity, interest rate and exchange rate risks following a more comprehensive framework. The study finds evidence that the risk exposures are time varying in nature and differ across banks with different characteristics. Equity risk and credit risk increase post the global financial crisis (GFC) while interest rate and exchange rate risk gets reduced. The capital market has a favourable view of small-sized, well-capitalized, well-diversified private sector banks. Furthermore, the results also show that asset size and ownership structure offer relevant information for differentiating banks regarding their riskiness. Large banks have more equity risk exposure; public sector banks have higher credit risks while private sector banks have greater interest rates and exchange rate risk exposure. The study offers valuable insights for the regulators, supervisors, policymakers, banking industry, bank managers, investors and academia. The main contribution is a better understanding of sources of banks’ risks and needs to enhance the supervisory process in the Basel framework.

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Re-Examining Exchange-Rate Risk Effects and Export Trade Using the ARDL Bounds Testing Approach

International Journal of Economics and Finance ◽

10.5539/ijef.v6n7p31 ◽

2014 ◽

Vol 6 (7) ◽

Cited By ~ 1

Author(s):

Augustine C. Arize ◽

John Malindretos

Keyword(s):

Exchange Rate ◽

Exchange Rate Risk ◽

Export Trade ◽

Bounds Testing ◽

Risk Effects ◽

Rate Risk ◽

Ardl Bounds Testing ◽

Bounds Testing Approach ◽

Testing Approach ◽

Ardl Bounds Testing Approach

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The Stock Market and Exchange Rates in Five South Asian Countries

Jurnal Ekonomi Pembangunan Kajian Masalah Ekonomi dan Pembangunan ◽

10.23917/jep.v18i1.4293 ◽

2017 ◽

Vol 18 (1) ◽

pp. 102 ◽

Cited By ~ 1

Author(s):

Firmansyah Firmansyah ◽

Shanty Oktavilia

Keyword(s):

Exchange Rate ◽

Financial Crisis ◽

Stock Market ◽

Exchange Rates ◽

Stock Returns ◽

Stock Prices ◽

Stock Return ◽

The Philippines ◽

Short Run ◽

The Exchange Rate

The composite price index and return of stocks are the important indicators, both as a measure of the company's portfolio performance, as well as an indicator of macroeconomic health and the aggregate investment. In addition, the stock prices are also influenced by macroeconomic variables and one of the most important is the exchange rates. The objective of this study is to determine the behavior of exchange rate affects the stock returns in Southeast Asia, pre and post of the 2008 world financial crisis. By employing the daily stock market return in Indonesia, Malaysia, the Philippines, Thailand, and Singapore more than seventeen years from 1 September 1999 to 31 March 2017, this study utilizes Engle-Granger error correction model and cointegration approach to investigate and compare the long and short run of the structural effect of the exchange rates on stock returns. To differentiate the behavior of variables between pre and post occurrence of 2008 world financial crisis, the estimation of the model is divided into two periods. This study finds that the exchange rate growth influence the stock returns in the long and short run, and proves that the cointegration between the two variables exist in all countries. The study has the implication that the exchange rate, which the one of the fundamental measures of a country's macroeconomic health, is an important determinant of influencing stock return, even its effects are responded by the stock return in one day.

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