An Empirical Study of the Interest Rate Sensitivity of Commercial Bank Returns: A Multi-Index Approach

Spanish stock market sensitivity to real interest and inflation rates: an extension of the Stone two-factor model with factors of the Fama and French three-factor model

“…The body of this literature is based on the Stone (1974) two-factor model (Lynge and Zumwalt, 1980, Sweeney and Warga, 1986, O'Neal, 1998, Fraser et al, 2002, Bartram, 2002, Soto et al, 2005, and Staikouras, 2005, focussing mainly on the financial institutions.…”

“…Following Lynge and Zumwalt (1980), Flannery and James (1984), Sweeney (1998) and Fraser et al (2002), the market return has been regressed on a constant and the series of real interest and inflation rates using OLS (ordinary least squares) estimation. Thus, the effect of each factor is isolated and the movement that remains is captured by the residuals.…”

The Responsiveness of LPT Returns and Their Attributes

“…Other notable studies that have employed a two-factor model include Lynge and Zumwalt (1980) who provided evidence to demonstrate that both short-and long-return debt indices have statistically significant inverse relationships on bank stock returns. Both Bae (1990) and Dinenis and Staikouras (1998) also found a significant inverse relationship between interest rates and stock returns; furthermore both studies showed the sensitivity of returns is an increasing function of the interest rate measure employed.…”

Derivative activities and Chinese banks’ exposures to exchange rate and interest rate movements

“…Several studies, including Chance and Lane (1980), Lloyd and Shick (1977), English (2002), Maes (2004, show that the movement of banks' stock returns are weakly influenced by interest rate changes. Others, however, observe a strong negative association between bank equity returns and changes in interest rate (see, for instance, Lynge and Zumwalt 1980;Flannery and James 1984;Schott and Peterson 1986;Bae 1990;Staikouras 2003).…”