Modeling interest rate volatility and stock return volatility: The case of the publicly listed banks in the Philippines

• Main Authors: Centeno, Mary Catherine M., Zialcita, Kathleen Marie P.
• Format: text
• Language: English
• Published: Animo Repository 2010
• Subjects: Interest rates > Philippines; Banks and banking > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18536
• Institution: De La Salle University

Unanticipated changes and volatilities in interest rate can significantly affect firms. This study investigates if unanticipated changes and volatilities of the 1-month, 3-month, 6-month, and 1-year treasury bill yield from March 19, 2007 to March 1, 2010 affect the daily common stock return of seven banks listed under the Philippine Stock Exchange. Data are taken from the Philippine Stock Exchange library and the Philippine Dealing and Exchange Corporation website. This study utilizes a student's t GARCH(p, q) and GJR-GARCH(p,q) models. Results show that three out of seven sample banks are significantly affected by unanticipated interest rate changes and two out of the seven sample banks respond symmetrically to unanticipated interest rate changes. In addition, also two out of the seven sample banks respond asymmetrically to interest rate volatility.