Interest rate and foreign exchange sensitivity of bank stock returns: evidence from China
Date
2013
Authors
Meng, X.
Deng, X.
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Journal article
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Multinational Finance Journal, 2013; 17(1-2):77-106
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Abstract
This study employs a GARCH model to investigate the effects of interest rate and foreign exchange rate changes on Chinese banks' stock returns. The results suggest that market movement and foreign exchange rate changes are statistically significant in explaining banks' stock returns, despite different reactions from different bank portfolios in regard to risks. Interest rate fluctuations, on the other hand, appear to be insignificant factors in equity pricing. The results confirm the link between market risks and stock returns and highlight the need for further interest rate liberalization.
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Copyright 2013 Multinational Finance Society