The research focus is both the measure and the investigation of the interaction between interest rates and stock prices. The final target is the proposition of a complete measure of stock duration to apply in asset management as well as in equity appraisal. After the recollection of the existing literature and prevailing practice measures for equity duration, the analysis focuses on the relationship between interest rates and stock prices applying the put-call parity paradigm in the presence of stock dividends. Subsequently, we developed an all-inclusive ’stock greek system’. The following step is the econometric validation of the relations between stock price and interest rate risk relevant determinants. The settled model is applied to a sample of listed financial institutions to evaluate the actual impact of interest rates on stock prices in the financial industry. The final target is twofold: firstly the breakdown of a comprehensive measure of interest rate risk for stocks and secondly the implementation of a model to verify the impact of interest rates on financial equities. The developed measure could be useful for asset management especially in structured and balanced portfolios; at the same time, the analysis of the impact of interest rates of financial institutions stock price gives rise to a deeper insight into financial institutions risk dynamics in volatile environments and turbulent context. Quantitative results clarify the relevance of dividend measures in the assessment of stock interest rate sensitivity, offering a deeper insight into price dynamics with special reference to the financial industry.

Are interest rates relevant to stock prices? On stage the performance of financial insitutions

COCOZZA, ROSA
2015

Abstract

The research focus is both the measure and the investigation of the interaction between interest rates and stock prices. The final target is the proposition of a complete measure of stock duration to apply in asset management as well as in equity appraisal. After the recollection of the existing literature and prevailing practice measures for equity duration, the analysis focuses on the relationship between interest rates and stock prices applying the put-call parity paradigm in the presence of stock dividends. Subsequently, we developed an all-inclusive ’stock greek system’. The following step is the econometric validation of the relations between stock price and interest rate risk relevant determinants. The settled model is applied to a sample of listed financial institutions to evaluate the actual impact of interest rates on stock prices in the financial industry. The final target is twofold: firstly the breakdown of a comprehensive measure of interest rate risk for stocks and secondly the implementation of a model to verify the impact of interest rates on financial equities. The developed measure could be useful for asset management especially in structured and balanced portfolios; at the same time, the analysis of the impact of interest rates of financial institutions stock price gives rise to a deeper insight into financial institutions risk dynamics in volatile environments and turbulent context. Quantitative results clarify the relevance of dividend measures in the assessment of stock interest rate sensitivity, offering a deeper insight into price dynamics with special reference to the financial industry.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11588/604202
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