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Bank Share Prices and Profitability

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  • Daniel Daugaard
  • Tom Valentine

Abstract

This paper considers the influence of economic conditions and financial markets on Australian bank share prices and profitability. It uses time series analysis to obtain an indication of the effectiveness of banks in managing their exposure to interest rates and exchange rates. The results give rise to some comments on the extent to which banks actively manage their exposure to financial and economic variables. The discussion of risk management activities necessarily raises the question of how recent regulatory initiatives will affect bank behaviour in these areas.

Suggested Citation

  • Daniel Daugaard & Tom Valentine, 1993. "Bank Share Prices and Profitability," Working Paper Series 31, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:31
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp31.pdf
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    References listed on IDEAS

    as
    1. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," The Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
    2. Tom Valentine, 1992. "Bank Interest Rate Margins," Working Paper Series 22, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Philip Lowe, 1992. "The Term Structure of Interest Rates, Real Activity and Inflation," RBA Research Discussion Papers rdp9204, Reserve Bank of Australia.
    4. Daniel Daugaard & Tom Valentine, 1992. "Share Prices: A Comparison of Fundamental Models," Working Paper Series 20, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    5. Madura, Jeff & White, Ann Marie & McDaniel, Wm R., 1991. "Reaction of British bank share prices to Citicorp's announced $3 billion increase in loan-loss reserves," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 151-163, February.
    6. Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(2), pages 241-256, June.
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    Cited by:

    1. Valentine, Tom, 1997. "Regulation of Bank Interest Rate Risk," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 31-41, June.
    2. Mehmed Ganić & BETÜL Ismić & Ognjen Riđić, 2015. "What drives the profitability of the banking sector? An Empirical evidence from Bosnia &Herzegovina," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(55), pages 39-56, March.
    3. Pariyada Sukcharoensin, 2013. "Time-Varying Market, Interest Rate and Exchange Rate Risks of Thai Commercial Banks," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 9(1), pages 25-45.

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