Please use this identifier to cite or link to this item: https://hdl.handle.net/20.500.14279/19339
Title: Banks’ equity performance and the term structure of interest rates
Authors: Elyasiani, Elyas 
Hasan, Iftekhar 
Kalotychou, Elena 
Pouliasis, Panos K. 
Staikouras, Sotiris K. 
Major Field of Science: Social Sciences
Field Category: Economics and Business
Keywords: Banks;Economic cycles;Equity return;Interest rate risk;Yield curve
Issue Date: May-2020
Source: Financial Markets, Institutions and Instruments, 2020, vol. 29, no. 2, pp. 43-64
Volume: 29
Issue: 2
Start page: 43
End page: 64
Journal: Financial Markets, Institutions and Instruments 
Abstract: Using an extensive global sample, this paper investigates the impact of the term structure of interest rates on bank equity returns. Decomposing the yield curve to its three constituents (level, slope and curvature), the paper evaluates the time-varying sensitivity of the bank's equity returns to these constituents by using a diagonal dynamic conditional correlation multivariate GARCH framework. Evidence reveals that the empirical proxies for the three factors explain the variations in equity returns above and beyond the market-wide effect. More specifically, shocks to the long-term (level) and short-term (slope) factors have a statistically significant impact on equity returns, while those on the medium-term (curvature) factor are less clear-cut. Bank size plays an important role in the sense that exposures are higher for SIFIs and large banks compared to medium and small banks. Moreover, banks exhibit greater sensitivities to all risk factors during the crisis and post-crisis periods compared to the pre-crisis period; though these sensitivities do not differ for market-oriented and bank-oriented financial systems.
URI: https://hdl.handle.net/20.500.14279/19339
ISSN: 1468-0416
DOI: 10.1111/fmii.12125
Rights: © The Authors.
Attribution-NonCommercial-NoDerivatives 4.0 International
Type: Article
Affiliation : Temple University 
Fordham University 
Cyprus University of Technology 
University of London 
Bank of Finland 
University of Sydney 
Appears in Collections:Άρθρα/Articles

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