search query: @indexterm INTEREST RATES / total: 1028
reference: 14 / 1028
| Author: | Czaja, M-G. Scholz, H. Wilkens, M. |
| Title: | Interest rate risk rewards in stock returns of financial corporations: Evidence from Germany |
| Journal: | European Financial Management
2010 : JAN, VOL. 16:1, p. 124-154 |
| Index terms: | Germany finance companies interest rates risk |
| Freeterms: | risk rewards benchmark portfolio approach |
| Language: | eng |
| Abstract: | A well-known phenomenon is the interest rate (hereafter as: i-r.) sensitivity of stock returns (here as: s-rts.) of financial (here as: fin.) and non-financial (as: non-fin.) corporations (as: corps). Using a benchmark (as: bnck./bncks.) portfolio (as: p-f./p-fs.) approach, this study constructs bnck. p-fs. having the same i-r. risk exposure as a particular stock. By studying the time series of returns of these asset-specific bncks., it is found: i. Irrespective of the industry considered, the i-r. risk bncks. of German (here as: G.) corps. have mostly earned a significantly positive reward, ii. Returns of i-r. rate risk bncks. of fin. institutions exceeded significantly those of non-fin. corps., iii. An investor willing to bear nothing but the average i-r. risk of G. fin. institutions would have earned a mean return of about or even exceeding 70 percent of the corresponding total s-rts., iv. Returns of the i-r. risk bncks. of the G. insurance sector were significantly higher than those of G. banks, which appears to contradict a conventional market wisdom of insurances hedging i-r. risks. |
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