Interest Rate Sensitivity of Stock Returns: Effects Across the Maturity Profile and Direction of Interest Rate Changes
John Carroll University - Department of Economics & Finance
University of Maryland Eastern Shore - School of Business and Technology
Southern Illinois University at Carbondale
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.
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.
Number of Pages in PDF File: 15
Keywords: interest rate sensitivity, bank stock returns, maturity profile
JEL Classification: G20, G21
Date posted: May 22, 2012 ; Last revised: September 25, 2012