The impact of interest rates on Philippine stock market
Date
2001-03
Authors
Patalinghug, Jason Albert C.
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Abstract
Empirical studies on the relationship between interest rates and Philippine stock market are rare. This study investigates the influence of interest rates on Philippine stock market.
The impact of foreign interest rates on Philippine stock market is examined by regressing separately changes in U.S. discount rate, Federal Funds rate, U.S. prime rate, and LIBOR on changes in Philippine stock market index. The impact of domestic interest rates on Philippine stock market is analyzed by regressing individually the change in the savings deposit rate, Treasury bill rate, and time deposit rate on the change in Philippine stock market index during the 1994-2000 period.
The estimates indicate that U.S. discount rate and Federal Funds rate do not affect Philippine stock market. But U.S. prime rate affects Philippine stock market. Among domestic interest rates, only savings deposit rates affect Philippine stock market. However, most of the evidence supports the hypothesis that the Philippine stock market is efficient in the semistrong form.
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Keywords
Interest rates, Interest, Stock market, Financial market, Financial institution, Philippine stock market