We use the multivariate extension of Exponential Generalized Autoregressive Conditionally Heteroscedastic (EGARCH) of Nelson, Econometrica, 59: 347-370, 1991 to test for spillover effects and examine the extent of asymmetries between short- and long-term interest rates and portfolios of money center, large, and medium-size banks in the U.S. Our results indicate the existence of price and volatility spillovers from short- and long-term interest rates to the three bank portfolios. We also provide evidence of response asymmetries for the portfolios of money center and large banks, suggesting that money center and large banks are more sensitive to negative than positive short- and long-term interest rate changes.

Bank stock returns, EGARCH, Interest rates
Journal of Economics and Finance
Sprott School of Business

Verma, P. (Priti), & Jackson, D. (2008). Interest rate and bank stock returns asymmetry: Evidence from U.S. banks. Journal of Economics and Finance, 32(2), 105–118. doi:10.1007/s12197-007-9004-4