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Interest Rate Risk of European Financial Corporations
Author(s) -
Oertmann* Peter,
Rendu Christel,
Zimmermann Heinz
Publication year - 2000
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00135
Subject(s) - interest rate , economics , equity (law) , interest rate risk , index (typography) , stock market index , financial economics , financial market , stock (firearms) , monetary economics , stock market , econometrics , finance , mechanical engineering , paleontology , horse , world wide web , political science , law , computer science , biology , engineering
We investigate the interest rate exposure of large European financial corporations’ equity returns. For the period from January 1982 to March 1995 we estimate multifactor index models to examine the sensitivity of equity returns to market index returns and domestic as well as global interest rate movements. In addition, we specify an APT‐model to test whether an exposure to interest rate movements is rewarded in the cross‐section of expected returns. In the four European markets both domestic and global interest rate shifts constitute driving forces of stock returns beyond the influence of the domestic market indices. However, the exposure to interest rate movements does not seem to be rewarded in the same fashion among the markets.