Exchange Rate and Interest Rate Exposure of UK Industries Using First-Order Autoregressive Exponential GARCH-in-Mean (EGARCH-M) Approach

Mojisola Olugbode, Ahmed El-Masry, John Pointon

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

We examine the sensitivity of 31 UK non-financial industries to exchange and interest rate exposure from 1990 to 2006 using first-order autoregressive exponential GARCH-in-mean (EGARCH-M) model. We find that the stock returns of UK industries are more affected by long-term interest rate risk than exchange rate risk and short-term interest rate risk. Moreover, the euro introduction decreases exchange and interest rate exposure and competitive industries exhibit higher returns volatility than concentrated industries. Furthermore, for most UK industries: increased risk does not necessarily lead to an increase in returns and persistence of volatility is much higher in some industries than others.
Original languageEnglish
Pages (from-to)409-464
Number of pages56
JournalManchester School
Volume82
Issue number4
DOIs
Publication statusPublished - 4 Jul 2014
Externally publishedYes

Fingerprint

Interest rates
Generalized autoregressive conditional heteroscedasticity
Industry
Exchange rates
Interest rate risk
Persistence
Exchange rate risk
Short-term interest rates
Stock returns
Long-term interest rates
Return volatility

Keywords

  • Exchange Rate Exposure
  • Interest Rate Exposure
  • Euro Introduction
  • GARCH Models
  • UK Industries

Cite this

Exchange Rate and Interest Rate Exposure of UK Industries Using First-Order Autoregressive Exponential GARCH-in-Mean (EGARCH-M) Approach. / Olugbode, Mojisola; El-Masry, Ahmed; Pointon, John.

In: Manchester School, Vol. 82, No. 4, 04.07.2014, p. 409-464.

Research output: Contribution to journalArticle

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