The relationship between exchange rates, interest rates and Australian bank returns

Jain, Ameeta, Narayan, Paresh Kumar and Thomson, Dianne 2011, The relationship between exchange rates, interest rates and Australian bank returns, Applied economics letters, vol. 18, no. 10, pp. 967-972.

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Title The relationship between exchange rates, interest rates and Australian bank returns
Author(s) Jain, Ameeta
Narayan, Paresh Kumar
Thomson, Dianne
Journal name Applied economics letters
Volume number 18
Issue number 10
Start page 967
End page 972
Total pages 6
Publisher Routledge
Place of publication Abingdon, England
Publication date 2011-07
ISSN 1350-4851
1466-4291
Summary Although 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.
Language eng
Field of Research 150201 Finance
150203 Financial Institutions (incl Banking)
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2011, Taylor & Francis
Persistent URL http://hdl.handle.net/10536/DRO/DU:30036791

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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