INTEREST RATE AND EXCHANGE RATE RISK SENSITIVITY OF BANK STOCK RETURN IN ASEAN-5: A PANEL DATA APPROACH
Abstract
This paper examines the roles of market, interest rate and exchange rate risks in the sensitivity of the bank stock returns in the ASEAN-5 countries, i.e. Indonesia, Malaysia, the Philippines, Singapore and Thailand, using the bank-level data. Empirical results from the panel data model show that the returns of bank stock’s portfolio are generally less risky than the market portfolio. Moreover, foreign exchange rate risk has the important roles in determinants of the bank stock returns in portfolios classified by countries and bank’s size. However, there is limited supporting evidence for the interest rate risk. The effects of interest rate risk on bank stock returns are significant only in case of the Singapore and Thailand. In addition, the interest rate risks have the significant impact in case of the large banks. However, the medium and small banks are not sensitive to changes in interest rates.
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