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EXPECTATIONS, INTEREST RATES, AND COMMERCIAL BANK STOCKS
Author(s) -
Booth James R.,
Officer Dennis T.
Publication year - 1985
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1985.tb00425.x
Subject(s) - interest rate , economics , equity (law) , financial economics , stock (firearms) , portfolio , monetary economics , stock market , index (typography) , econometrics , mechanical engineering , paleontology , political science , law , computer science , biology , engineering , horse , world wide web
This study examines the effect of current and expected interest rate changes on bank equity values and attempts to reconcile the conflicting findings of previous research regarding this issue. A multiple index market model of bank security returns is specified and estimated. The results confirm the existence of an interest rate effect on bank stocks that is not explained by returns on the market portfolio. In addition, bank stock returns appear to be sensitive to an interest rate forecast error.