Interest rate sensitivity of the European stock markets before and after the euro introduction

Timo Korkeamäki

Journal of International Financial Markets, Institutions and Money, 2011, vol. 21, issue 5, 811-831

Abstract: Introduction of the euro altered corporate financing markets for the euro zone firms in an unprecedented way. Since 1999, firms from the euro zone countries are able to raise funds in their home currency in the large common currency market. I find that while stock returns in most countries in the Western Europe were negatively correlated with interest rate changes prior to the euro, that correlation has disappeared since 1999. My results reveal that recent growth in European corporate bond markets has played an important role in enabling firms to better manage their interest rate risk.

Keywords: Interest rate risk; Euro (search for similar items in EconPapers)
JEL-codes: F36 G15 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:21:y:2011:i:5:p:811-831

DOI: 10.1016/j.intfin.2011.06.005

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