Journal of Finance Vol. 39 No. 4 1984

The Effect of Interest Rate Changes on the Common Stock Returns of Financial Institutions

Mark J. Flannery; Christopher M. James¹

¹ University of North Carolina and University of Oregon, respectively. Special thanks go to Ron Masulis and Wayne Ferson for lengthy discussions on the subject of this paper. We would also like to thank Larry Dann, Mike Hopewell, Megan Partch, George Racette, Richard Startz, Alden Toevs, and Peggy Wie

Abstract

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.

DOI

10.1111/j.1540-6261.1984.tb03898.x

Volume

39

Issue

4

Pages

1141-1153

Language

en

Sources

crossref openalex

Cite

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