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The relationship between exchange rates, interest rates and Australian bank returns
journal contribution
posted on 2011-07-01, 00:00 authored by Ameeta JainAmeeta Jain, Paresh Narayan, Dianne ThomsonAlthough there has been significant research on US financial intermediaries' stock returns and sensitivity to interest yields, there has only been limited research on Australian bank stock returns and key macro variables, such as interest rates and exchange rates. The aim of this article is to examine this relationship for four major Australian banks, namely the Australia New Zealand bank (ANZ), the Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB) and the Westpac Banking Corporation (WBC). We use the EGARCH model and examine the relationship using monthly data covering the period 1992 to 2007. The results suggest that for all four banks: (1) there is a similar and statistically significant negative relationship between interest rates and stock returns; and (2) there is evidence of an increase in returns during the period of appreciation of the Australian dollar.
History
Journal
Applied economics lettersVolume
18Issue
10Pagination
967 - 972Publisher
RoutledgeLocation
Abingdon, EnglandPublisher DOI
ISSN
1350-4851eISSN
1466-4291Language
engPublication classification
C1 Refereed article in a scholarly journalCopyright notice
2011, Taylor & FrancisUsage metrics
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