Bank stock return sensitivities to the long‐term and short‐term interest rates: a multivariate GARCH spproach

2004 ◽  
Vol 30 (9) ◽  
pp. 32-55 ◽  
Author(s):  
Elyas Elyasiani ◽  
Iqbal Mansur
Keyword(s):  
Interest Rates ◽  
Stock Return ◽  
Multivariate Garch ◽  
Short Term ◽  
Bank Stock

scholarly journals The Impact of Exchange Rates and Interest Rates on Bank Stock Returns: Evidence from U.S. Banks

2016 ◽  
Vol 11 (1) ◽  
pp. 124-139 ◽  
Author(s):  
Verma Priti
Keyword(s):  
Exchange Rates ◽  
Interest Rates ◽  
Stock Returns ◽  
Short Term ◽  
Volatility Spillovers ◽  
Hedging Strategies ◽  
Bank Stock ◽  
The Impact ◽  
Bank Portfolios

AbstractThis paper examines the mean, volatility spillovers and response asymmetries between short-term and long-term interest rates, exchange rates and portfolios of money center, large and medium-sized banks in the U.S. I use the multivariate version of Nelson’s (1991) Exponential Generalized Autoregressive Conditionally Heteroscedastic (EGARCH) model. Results indicate mean and volatility spillovers from short-term interest rates and exchange rates and long-term interest rates and exchange rates to three bank portfolios. Results also show response asymmetries from short-term interest rates and exchange rates and long-term interest rates and exchange rates to all the three bank portfolios. These findings have important implications for bankers in terms of devising different hedging strategies against interest rates and exchange rate risks.

scholarly journals CANDIDE et la monnaie

2009 ◽  
Vol 52 (1) ◽  
pp. 75-103
Author(s):  
Jean-Pierre Aubry ◽  
Pierre Duguay
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Structural Equations ◽  
Reduced Form ◽  
Real Sector ◽  
Short Term ◽  
The Real ◽  
Structure Equations

Abstract In this paper we deal with the financial sector of CANDIDE 1.1. We are concerned with the determination of the short-term interest rate, the term structure equations, and the channels through which monetary policy influences the real sector. The short-term rate is determined by a straightforward application of Keynesian liquidity preference theory. A serious problem arises from the directly estimated reduced form equation, which implies that the demand for high powered money, but not the demand for actual deposits, is a stable function of income and interest rates. The structural equations imply the opposite. In the term structure equations, allowance is made for the smaller variance of the long-term rates, but insufficient explanation is given for their sharper upward trend. This leads to an overstatement of the significance of the U.S. long-term rate that must perform the explanatory role. Moreover a strong structural hierarchy, by which the long Canada rate wags the industrial rate, is imposed without prior testing. In CANDIDE two channels of monetary influence are recognized: the costs of capital and the availability of credit. They affect the business fixed investment and housing sectors. The potential of the personal consumption sector is not recognized, the wealth and real balance effects are bypassed, the credit availability proxy is incorrect, the interest rate used in the real sector is nominal rather than real, and the specification of the housing sector is dubious.

scholarly journals Macroeconomic Synchronization Between G3 Countries

2002 ◽  
Vol 3 (2) ◽  
pp. 137-153 ◽  
Author(s):  
Amado Peirό
Keyword(s):  
Business Cycle ◽  
Interest Rates ◽  
Short Term ◽  
The Us ◽  
Production Prices ◽  
Over Time

AbstractThis paper studies the existence of a world business cycle by examining quarterly and annual comovements in production, prices and interest rates in the three main world economies: Germany, Japan and the US. In accordance with earlier studies, contemporaneous relationships clearly dominate short-term dynamics. The evidence indicates the existence of strong comovements in prices and long-term interest rates, and, to a lesser degree, in GDP and short-term interest rates. They are, however, rather unstable over time.

scholarly journals Journal of the History of Economic Thought Preprints - Limits to Arbitrage and Interest Rates: A Debate Between Keynes, Hawtrey and Hicks

2018 ◽  
Author(s):  
Lucy BRILLANT
Keyword(s):  
Business Cycle ◽  
Central Bank ◽  
Interest Rates ◽  
Economic Thought ◽  
History Of Economic Thought ◽  
Short Term ◽  
Limits To Arbitrage ◽  
History Of ◽  
The Business Cycle

This paper deals with a debate between Hawtrey, Hicks and Keynes concerning the capacity of the central bank to influence the short-term and the long-term rates of interest. Both Hawtrey and Keynes considered the central bank’s ability to influence short-term rates of interest. However, they do not put the same emphasis on the study of the long-term rates of interest. According to Keynes, long-term rates are influenced by future expected short-term rates (1930, 1936), whereas for Hawtrey (1932, 1937, 1938), long-term rates are more dependent on the business cycle. Short-term rates do not have much effect on long-term rates according to Hawtrey. In 1939, Hicks enters the controversy, giving credit to both Hawtrey’s and Keynes’s theories, and also introducing limits to the operations of arbitrage. He thus presented a nuanced view.

ANALISIS PENGARUH NILAI SAHAM YANG BEREDAR, STRUKTUR MODAL, RISIKO PASAR, DAN SUKU BUNGA TERHAD AP RETITRN SAHAM DI BEJ DENGAN PENDEKATAN MODEL DINAMIS (Studi Kasus Pada Sektor Aneka lndustri Tahun 1996-2002)

2005 ◽  
Vol 1 (1) ◽  
pp. 20
Author(s):  
Ari Christianti ◽  
Murti Lestari
Keyword(s):  
Capital Structure ◽  
Dynamic Model ◽  
Stock Return ◽  
Negative Impact ◽  
Short Term ◽  
Correction Model ◽  
Industry Sector ◽  
The Interest Rate ◽  
Model Approach

The study aims at empirically proving and analyzing the balance model of Capital Asset Pricing Model (CAPM with the multifactor of risks, consisting of: outstanding stocks value, capital structure represented by Debt EquiQ Ratio (DER), market risk as represented by stock market beta, and the interest rate on company return on stock.This research uses a dynamic model approach considering the existence of the weaknessesin a classic linear model. Since the investment is related to investors behavior that need a lag to market change, the use of the dynamic model approach will be better. It is because the dynamic model uses autoregressive approach containing the lag. The dynamic model used here is Partial Adjustment Model (PAM) and Error Correction Model (ECM).  Based on the estimation of the PAM model it is proven that the model is inefficient in finding the evidence confirming the hypothesis. Subsequently,based on the result of the examination of the ECM model it isconcluded that outstanding stocks value has a positive and signiJicant impact in short term and a negative impact in long term. It means that in the short term outstanding stocks value serves as the consideration for investors in making an investment. However in the long term they are likely to believe that the use of smaller internal capital proportion will be more beneficial for them. The capital structure has only a longierm impact on the return on stock. It means that the impact of DER on stock return on miscellaneous industry sector needs the quite long lag to influence the investors in determining stocks return. It indicates that in the long term they believ:e that the use of increasing number of loan will causes the decrease in company liquidity. Consequently, the opportunity for the company to go bankrupt is bigger Beta stock in the study has a negative impact in the long term. Theoretically, it is not consistent with the parameter direction and indicated that beta stock does notserve as an app;r,pviate prory in measuring the rislcs on. miscellaneous industry sector The interest rate has in the long term a negative impact on stocks return and needs the long lag to influence the investors in determining the return on stocks.Keywords: Stock return, outstanding stock value, DER (Debt Equity Ratio), beta, interest rote, ECM (Eruor Correction Model)

How loan interest rate liberalization affects firms’ loan maturity structure

2014 ◽  
Vol 4 (2) ◽  
pp. 153-167 ◽  
Author(s):  
Jianfang Zhou ◽  
Jingjing Wang ◽  
Jianping Ding
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Manufacturing Companies ◽  
Short Term ◽  
Data Set ◽  
Content Type ◽  
Interest Rate Liberalization ◽  
Upper Limit ◽  
Maturity Structure

Purpose – After loan interest rate upper limit deregulation in October 2004, the financing environment in China changed dramatically, and the banks were eligible for risk compensation. The purpose of this paper is to focus on the influence of the loan interest rate liberalization on firms’ loan maturity structure. Design/methodology/approach – Based on Rajan's (1992) model, the authors constructed a trade-off model of how the banks choose long-term and short-term loans scales, and further analyzed banks’ loan term decisions under the loan interest rate upper limit deregulation or collateral cases. Then the authors used an unbalanced panel data set of 586 Chinese listed manufacturing companies and 9,376 observations during the period 1996-2011 to testify the theoretical conclusion. Furthermore, the authors studied the effect on firms with different characteristics of ownership or scale. Findings – The results show that the loan interest rate liberalization significantly decreases the private companies’ reliance on short-term loans and increases sensitivity to interest rates of state-owned companies’ long-term loans. But the results also show that the companies’ ownership still plays a key role on the long-term loans availability. When monetary policy tightened, small companies still have to borrow short-term loans for long-term purposes. As the bank industry is still dominated by state-owned banks and the deposit interest rate has upper limits, the effect of the loan interest rate liberalization on easing long-term credit constraints is limited. Originality/value – From a new perspective, the content and findings of this paper contribute to the study of the effect of the interest rate liberalization on China economy.

scholarly journals Quantitative Monetary Easing and Risk in Financial Asset Markets

2006 ◽  
Vol 6 (1) ◽  
pp. 1-54 ◽  
Author(s):  
Takeshi Kimura ◽  
David H. Small
Keyword(s):  
Interest Rates ◽  
Large Scale ◽  
Corporate Bonds ◽  
Asset Markets ◽  
Low Grade ◽  
Short Term ◽  
Government Bonds ◽  
Risk Premiums ◽  
Portfolio Rebalancing

In this paper, we empirically examine the portfolio-rebalancing effects stemming from the policy of “quantitative monetary easing” recently undertaken by the Bank of Japan when the nominal short-term interest rate was virtually at zero. Portfolio-rebalancing effects resulting from the open market purchase of long-term government bonds under this policy have been statistically significant. Our results also show that the portfolio-rebalancing effects were beneficial in that they reduced risk premiums on assets with counter-cyclical returns, such as government and high-grade corporate bonds. But, they may have generated the adverse effects of increasing risk premiums on assets with pro-cyclical returns, such as equities and low-grade corporate bonds. These results are consistent with a CAPM framework in which business-cycle risk importantly affects risk premiums. Our estimates capture only some of the effects of quantitative easing and thus do not imply that the complete set of effects were adverse on net for Japan’s economy. However, our analysis counsels caution in accepting the view that, ceteris paribus, a massive large-scale purchase of long-term government bonds by a central bank provides unambiguously positive net benefits to financial markets at zero short-term interest rates.

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