Time-varying sensitivity of stock returns to market, interest rate and foreign exchange rate risks of Asian banks using the GARCH model

• Main Authors: Abralzaldo, Romarie L., Ho, Hanna Christelle C., Pabico, Kristine Lian J., Padilla, Nikki T.
• Format: text
• Language: English
• Published: Animo Repository 2015
• Subjects: Foreign exchange rates > Philippines; Interest rates > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/7755
• Institution: De La Salle University

Assessing the sensitivity of bank stock returns to time-varying market, interest rate, and foreign exchange rate risk using the GARCH framework has been a common area of study for developed markets but not for emerging markets. This conventional study was applied to five (5) selected Asian emerging markets (China, Malaysia, Philippines, South Korea and Thailand) using January 2010 to December 2014 data. This research re-examined the reaction of bank stock returns to three (3) risk variables. Also similarities and differences between the reactions for each country were studied. The findings were used to determine similar patterns to further support the resulting relationship of variables. Results indicated that foreign exchange risks have a significant positive relationship to bank stock returns in all countries except for the Philippines. Interest rates affected bank stock returns negatively excluding South Korea, market risks share a positive relationship with bank stock returns.