Dynamic correlation analysis of spill-over effects of interest rate risk and return on Australian and US financial firms

Md Akhtaruzzaman, Abul Shamsuddin () and Steve Easton

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 378-396

Abstract: This paper examines the spill-over effects of interest rate risk and return on Australian and US financial firms using a dynamic conditional correlation GARCH model. Australian banks exhibit negative exposure to changes in both domestic and US interest rates, and US interest rate volatility is found to be an important predictor of Australian bank stock return volatility. Similar findings are obtained for the aggregate portfolio of financial stocks. The time-varying conditional correlation between Australian and US financial stock returns increases during financial crises and varies directly with net capital flows between Australia and the US. Further, the conditional correlation increases (decreases) during the contractionary (expansionary) periods of the US business cycle.

Keywords: Financial firms; Interest rate risk; Dynamic conditional correlation (search for similar items in EconPapers)
JEL-codes: G12 G21 G22 G23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443114000547
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:378-396

DOI: 10.1016/j.intfin.2014.04.006

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().