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Interest Rate Sensitivity of Banking Sector Stock Returns


Affiliations
1 Delhi Institute of Advanced Studies, Guru Gobind Singh Indraprastha University, Delhi, India
     

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Thecurrent study scrutinizes the influence of interest rate changes on the unpredictability of stock returns and type of association between interest rate movements and stock returns of banking sector in India by applying the methodology of GARCH (1, 1) model, Correlation test and Johansen's Cointegration Test. The study considers the period from April 2000 toMarch, 2018. 11 banks that are listed in the S and P BSE 500 index is taken as sample for the study. Returns of banking sector stocks in India are found to highly sensitive and volatile to interest rate changes. Results of the present study have a great importance for policy regulators and investment community at large.

Keywords

Volatility, Treasury Bill, Stock Returns, S and P BSE 500.
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  • Tran H.T (2013). Relationship between Interest Rate and Bank Common Stock Return: Evidence from the Top 10 United States Banks and Financial Sector Index.
  • Latha, K., gupta, S., and Ghosh, R. (2016). Interest Rate Sensitivity of Stock Returns: A Case Study Of Textile Sector In India. Asian Journal of Multidisciplinary Studies, 4(4).
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  • Interest Rate Sensitivity of Banking Sector Stock Returns

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Authors

Neetu Chadha
Delhi Institute of Advanced Studies, Guru Gobind Singh Indraprastha University, Delhi, India

Abstract


Thecurrent study scrutinizes the influence of interest rate changes on the unpredictability of stock returns and type of association between interest rate movements and stock returns of banking sector in India by applying the methodology of GARCH (1, 1) model, Correlation test and Johansen's Cointegration Test. The study considers the period from April 2000 toMarch, 2018. 11 banks that are listed in the S and P BSE 500 index is taken as sample for the study. Returns of banking sector stocks in India are found to highly sensitive and volatile to interest rate changes. Results of the present study have a great importance for policy regulators and investment community at large.

Keywords


Volatility, Treasury Bill, Stock Returns, S and P BSE 500.

References