Analysing Interest Rate and Exchange Rate Volatility on South African Banks' Stock Returns Considering the COVID-19 Pandemic

This paper analysed the impact of interest rate and exchange rate volatility on banking sector stock returns in South Africa considering the Covid-19 pandemic. This paper employed daily secondary data for the period 01 January 2011 - 19 August 2021. The OLS and GARCH approaches were utilized to analyse the relationship between the variables. The results indicate that the interest rates have a positive and significant relationship with bank stock returns as four out of five banks showed positive coefficients in the OLS estimator. Moreover, a high foreign exchange rate leads to a negative bank stock returns as the coefficients from the OLS estimator were negative. The ARCH and GARCH models' results indicate that bank stock returns are determined by their past volatility. The study has managerial implications for the banking sector because interest rate and exchange rate volatility increase the risks associated with the returns, implying that banks should consider various hedging strategies in mitigating these risks. Therefore, banks should consider various hedging strategies while the investors could attentively consider monetary policies during the investment decision process.

Loan Moratorium Announcements and Stock Market Reaction: An Event Study Analysis

Moratorium pinjaman telah menjadi talian hayat yang amat penting bagi ramai peminjam semasa pandemik COVID-19. Walaupun sejumlah besar dana telah diperuntukkan untuk membantu peminjam yang terjejas, kesan moratorium pinjaman terhadap bank masih tidak terjawab. Kajian ini bertujuan untuk mengkaji kesan pengumuman moratorium pinjaman terhadap saham bank Malaysia. Dengan menggunakan metodologi event study, kajian ini menunjukkan bahawa pelabur bank bertindak balas secara berbeza terhadap jenis moratorium pinjaman yang berlainan. Pelabur bank menyambut baik moratorium yang tidak mengetepikan faedah terakru dan meliputi kumpulan peminjam yang lebih luas. Kajian ini mencadangkan bahawa walaupun moratorium perlu diberikan kepada peminjam semasa mereka menghadapi kesukaran, kepentingan kewangan bank juga perlu dipertimbangkan. Oleh itu, moratorium pinjaman perlu disertakan pembayaran faedah terakru untuk memastikan prospek bank kekal stabil dari sudutpandangan pelabur.Alternate :Loan moratoriums have been a crucial lifeline defence for many borrowers during the unprecedented COVID-19 pandemic. Despite the massive amount of funds allocated to support affected borrowers, the impact on banks remains unexplored. This study aims to examine the impact of the loan moratorium announcements on Malaysian banks ' stocks. Utilising an event study methodology, this study shows that bank investors reacted differently to different types of loan moratoriums. Bank investors positively valued moratoriums that did not waive accrued interest and covered a broader group of borrowers. This study suggests that while moratoriums must be given to borrowers during difficult times, the financial interests of banks should also be considered. Hence, loan moratoriums should feature accrued interest payments to ensure the banks ' prospects remain stable from the investors' perspective.

Tail connectedness between lending/borrowing tokens and commercial bank stocks

This paper explores a fresh topic about the tail connectedness between decentralized- lending/borrowing tokens and centralized-commercial bank stocks, regarded as substitutes. Using the methodological approach proposed by Ando et al. (2022), we compare connectedness results at extreme (lower and upper) quantile levels. DeFis and traditional bank stocks may show positive but low spillovers, thus DeFi lending tokens would constitute a new commercial banking asset class. In addition, the tails of the distribution would show excess return (static and dynamic) spillover compared to the mean and median, indicating an increased sensitivity in the extreme market conditions (such as the COVID-19 pandemic), especially in the left tail. The dynamic net spillovers may vary over time for all markets and increase during periods of uncertainty, in line with very recent studies. Also, RTD (Relative Tail Dependence) rejects quasy-symmetry due to its time-variation, ranging between positive and negative values. Therefore, traders and portfolio managers would need to adjust their positions depending on the time-varying net spillovers.

Pandemic waves, government response, and bank stock returns: evidence from 36 countries

Purpose>The paper examines the impact of COVID-19 on bank stock returns over various time scales and frequencies for 36 countries. Moreover, the authors look at the governments' responses to the corona crisis and examine its impact on bank stock returns.Design/methodology/approach>The paper applies continuous wavelet transformation to obtain robust estimates of the co-movement (coherency) between confirmed cases and bank stock returns over time and at different time scales. Furthermore, the authors apply fixed effects panel regression to examine the response of bank stocks to domestic COVID-19 policies.Findings>The results indicate that the number of confirmed COVID-19 cases negatively impacts bank stock returns during different waves of the pandemic in the medium-run. However, there is only little dependence in the very short-run. Moreover, bank stock returns positively react to domestic COVID-19 polices. This demonstrates that governmental interventions not only reduce the spread of COVID-19 but are also able to thereby calm financial markets.Originality/value>The application of wavelet methods to the field of economics and finance is relatively recent and allows the distinction between short-term and long-term effects. Standard econometric methods, in contrast, only operate within the time domain. This paper combines wavelet methods with conventional econometrics to answer the research question.