The impact of interest rates on bank stock returns

Abstract

The interest rate has a wide impact in the financial world, the center of which is banks and monetary policy. A rise in interest rates has generally been found to have a negative effect on stock returns, but there have been different research results over the course of the stock market history. Especially during various crises, such as the 2008 financial crisis and during Covid-19, central banks have had to take measures to calm the situation, in which case interest rate changes are often part of monetary policy, affecting particularly banks. This study examines banks' operations and especially, examines the effects of interest rate changes on bank stocks returns. The focus is on US banks of different asset sizes to gain relevant information extensively. This study examines the period after the financial crisis to maximize the evidence and reliability.