Interest Rate Sensitivity of Stock Returns: Effects Across the Maturity Profile and Direction of Interest Rate Changes

Lim, S., Sum, V., & Khun, C. (2012). Interest rate sensitivity of stock returns: Effects across the maturity profile and direction of interest rate changes. International Research Journal of Applied Finance, 3(8), 1151-1162.

15 Pages Posted: 22 May 2012 Last revised: 25 Sep 2012

Sokchea Lim

John Carroll University - Department of Economics & Finance

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Channary Khun

Southern Illinois University at Carbondale

Date Written: May 22, 2012

Abstract

The paper re-examines the effect of unanticipated interest rate changes on bank stock returns of 14 U.S. largest bank holding companies across the maturity profile and across the two directions of interest rate changes. The evidence indicates that fluctuations in commercial bank stock prices are significantly associated with unanticipated interest rate changes and bank stock return interest rate sensitivity is related to the balance sheet composition. However, the results provide little evidence that supports the asymmetry of interest rate sensitivity across the direction of unanticipated changes being positive or negative.

Keywords: interest rate sensitivity, bank stock returns, maturity profile

JEL Classification: G20, G21

Suggested Citation

Lim, Sokchea and Sum, Vichet and Khun, Channary, Interest Rate Sensitivity of Stock Returns: Effects Across the Maturity Profile and Direction of Interest Rate Changes (May 22, 2012). Lim, S., Sum, V., & Khun, C. (2012). Interest rate sensitivity of stock returns: Effects across the maturity profile and direction of interest rate changes. International Research Journal of Applied Finance, 3(8), 1151-1162. . Available at SSRN: https://ssrn.com/abstract=2064948

Sokchea Lim

John Carroll University - Department of Economics & Finance ( email )

University Heights, OH 44118
United States

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

Channary Khun

Southern Illinois University at Carbondale ( email )

Rehn Hall - Mail Code 4626
Carbondale, IL Illinois 62901-4515
United States

HOME PAGE: http://www.siu.edu

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