The impact of the movement in repurchase rate, reverse repurchase rate, treasury bill rate, and treasury bond rate on common stock returns of banks listed in the Philippine Stock Exchange (2010-2014)

• Main Authors: Chu, Erica Leona T., Gomez, Chelsea Julia M., Manuel, Maria Nichole C., Vitug, Joseph Anthony J.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Rate of return; Stock exchanges; Investments, Foreign > Effect of stock prices on > Econometric models; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/11388
• Institution: De La Salle University

Stock returns are undoubtedly affected by various macroeconomic factors. Existing literature points to foreign direct investment, exchange rate, and interest rates as some of the factors. This paper focused on how interest rates affect stock returns. This study aimed to establish a significant relationship between listed banks stock returns and four (4) different interest rates. The rates used in this study are repurchase rate (RP), reverse repurchase rate (RRP), 91-day Treasury Bill Rate, and 7-year Treasury Bond Rate. Monthly stock returns of ten (10) banks that were actively traded in the Philippine Stock Exchange (PSE) in the period of 2010-2014 were regressed against monthly rates. Vector Autoregressive models were estimated per bank, determining the lagged effect of the variables. Also, a Granger Causality test was used to determine if the variables were correlated. Finally, a regression was done to establish whether or not the variables significantly affect each other. It was found that RP, RRP, 91-day T-bill rates, and 7-year Treasury bond rates do not have a significant effect on banks stock returns. Neither was there Granger causality between them.