Interest Sensitive Stock

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Interest Sensitive Stock

A stock whose value is likely to increase or decrease substantially due to changes in interest rates. Most interest sensitive stocks represent publicly-traded companies with high rates of long-term debt. These companies' stocks decrease in value when interest rates rise because the higher cost of borrowing may result in lower profits and dividends. Conversely, their stocks rise on lower interest rates. For this reason, utility companies tend to have interest sensitive stocks.
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References in periodicals archive ?
This may provide some valuable information on the strain rate sensitivity of the material.
Many engineers recognize the strain rate sensitivity of ductile iron, says Mani.
Strain rate sensitivity must be considered in casting design and application and with the process used in the production of the final part.
Your decision to use either approach to managing your rate risk depends on your company's rate sensitivity.
To date, most examinations into the interest rate sensitivity of commercial bank returns have employed a two-factor pricing model in which an interest rate variable is added to the simple market model
The specific case of interest rate sensitivity of financial institution common stocks has been addressed by numerous authors with results which frequently conflict.
Lynge and Zumwalt (1980), used Stone's (1974) model in finding significant interest rate sensitivity of commercial bank common stocks using both short- and long-term interest rate indices.
Examining interest rate sensitivity of bank stock returns under alternative econometric specifications, Akella and Chen (1990) found that bank stock returns are sensitive to holding period returns on long-term government securities.
Kwan (1991) tested a random coefficient two-index model for commercial bank returns and found significant interest rate sensitivity which was positively related to the maturity mismatch between bank assets and liabilities.
Chance and Lane (1980) examined the interest rate sensitivity of financial institution common stocks with results indicating that interest rate indices were not significant in explaining bank common stock returns.
They hypothesized that financial institution stock interest rate sensitivity is dependent on the stage of the interest rate cycle and dominant Federal Reserve policy over the period for which return data are collected.
No empirical studies appear to exist that test large commercial bank stock return interest rate sensitivity in conjunction with changes in the business cycle per se.