Interest Rate Sensitivity and Investor Disagreement: How to Explain Bank Stock Turnover

Mark Iarovyi, Sasson Bar-Yosef and Itzhak Venezia

Chapter 61 in Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives:In 4 Volumes, 2024, pp 1961-1990 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Maturity mismatches (MMs) expose banks to interest rate sensitivity, adding to the uncertainty of banks’ performances. Since information regarding MMs is usually not readily available, considering the high correlation between the two, interest rate sensitivities could serve as proxies to these mismatches for short periods. Therefore, we label them as implied MMs. Our analyses of the correlation between banks’ interest rate sensitivity and the trading volume of the banks’ equity reveal positive correlations. The heightened increase in volume suggests that implied MMs increase disagreement among banks’ investors.

Keywords: Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting (search for similar items in EconPapers)
JEL-codes: G1 G11 G12 G3 M41 M42 (search for similar items in EconPapers)
Date: 2024
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