Dissertation/Thesis Abstract

Interest rate uncertainty and stock market volatility
by Xu, Jincai, M.Sc., Singapore Management University (Singapore), 2007, 52; 1489321
Abstract (Summary)

The reason for volatility changing over time is still open. As stated in the extant papers uncertainty of Macroeconomic variable plays more important role in explaining the time varying of volatility than the volatility of Macroeconomic variable itself. In this paper we illustrate this with exploring the relationship between stock market volatility and the Interest Uncertainty. In the paper, we take the uncertainty of the decision of FOMC meeting as the uncertainty of interest rate. As we know, asset price is a tool for people to express their belief about the state of the economy, when uncertainty is high, a slight change in the belief will cause substantial shift in their holdings. Thus we expect that stock market volatility is increasing with uncertainty of interest rate. By using the Federal Fund Future to measure the uncertainty, we find the significance of impact of uncertainty on volatility is different across industries. In addition, the relationship between interest uncertainty and stock volatility is stronger for small firms than that for big firms. In addition, we investigate the possible reason for the sensitivity of interest rate uncertainty, the empirical results confirm that dividend yield is the factor that impacted most, comparing to the leverage ratio which represent the capital structure is not an important factor.

Indexing (document details)
Advisor: Yu, Jun
Commitee:
School: Singapore Management University (Singapore)
Department: Lee Kong Chian School of Business
School Location: Republic of Singapore
Source: MAI 49/04M, Masters Abstracts International
Source Type: DISSERTATION
Subjects: Finance, Banking
Keywords: Asset price, Dividend yield, Interest rate, Leverage ratio, Stock market volatility
Publication Number: 1489321
ISBN: 9781124503165
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