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The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions
Author(s) -
FLANNERY MARK J.,
JAMES CHRISTOPHER M.
Publication year - 1984
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1984.tb03898.x
Subject(s) - stock (firearms) , interest rate , loan , maturity (psychological) , economics , monetary economics , common stock , financial economics , business , econometrics , financial system , finance , biology , mechanical engineering , psychology , paleontology , developmental psychology , context (archaeology) , engineering
This paper examines the relation between the interest rate sensitivity of common stock returns and the maturity composition of the firm's nominal contracts. Using a sample of actively traded commerical banks and stock savings and loan associations, common stock returns are found to be correlated with interest rate changes. The co‐movement of stock returns and interest rate changes is positively related to the size of the maturity difference between the firm's nominal assets and liabilities.