A Re-Examination of the Asymmetry between Interest Rates and Stock Returns
International Journal of Economics and Finance, 2017, vol. 9, issue 6, 23-30
The purpose of this paper is to reconcile previous findings of prolonged asymmetrical relationships between interest rates and stock returns, where a reduction in interest rates in one month was shown to produce positive stock returns over a twelve-month period. This study provides evidence that the puzzling relationships suggested by a previous study are sample-dependent and cannot withstand further scrutiny. Test results presented in this study show that investors are not likely to earn abnormal returns through an investment strategy constructed on the expectation of long-term positivie returns following a reduction in interest rates.
Keywords: stock returns; interest rates; market efficiency; information asymmetry (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:9:y:2017:i:6:p:23-30
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