Stock Market Sensitivity to Interest Rates and Inflation
39 Pages Posted: 26 May 2003
Knowledge of the interest rate sensitivity of stocks is important in many areas of investment and finance. This paper makes three contributions to the existing literature: (a) it provides estimates of stock sensitivity to changes in nominal and real interest rates and expected inflation (b) it provides estimates of the degree of indexation of future growth expectations to changes in nominal and real interest rates and expected inflation and (c) examines whether government regulation, cyclicality of future cash flows and growth versus value characteristics of stocks can explain the differences in interest rate sensitivities across stocks.
Keywords: stocks market sensitivity to interest rates and inflation, equity duration, determinants of interest rate sensitivity
JEL Classification: C10, G3, G12, G10
Suggested Citation: Suggested Citation