Reference no: EM132399882

Impact of interest rate changes on the Australian stock market

Intent: Analyse how changes to X - long rates, or short rates? on Y - Australian stock market (different sample time periods, across GICS sectors)

Economic reasoning/ theory: Inverse relationship between interest rates and equities. Why? Higher costs of borrowing, impact company financial performance.

Positive relationship between interest rates and equities. Why? Interest rates increase the risk premium of investing in risky assets like equities. So if risk free rates increase, so will required ratesof return for risky investments like stocks.

Research question: Has the relationship between interest rates and Australian equities changed before and after the GFC, and how?

We compare 10 year before GFC against 10 years after GFC and see if the relationships and impact of interest rates on Australian equities have changed?

Choosing long and short interest rates. Normally use literature review to help support your choice. 10-year Corporate Bond yields BBB+ as long rates, and 30-day Bank Accepted Bills as short rates. (RBA, Eikon, Bloomberg)

Choose a few top sectors based on you interest, so you can see the impact of different kinds of interest rates, on different typesof companies.

Abstract

Introduction - Why is it important to examine the relationship between interst rates and equity? Why look at this issue pre GFC then post GFC? (motivation for the paper). Explain some of the key economic relationhips/ theories that underlie the linkage between interest rates and equity returns. Section finishes with introducing what the subsequent sections will cover.

Literature Review - (i) Seminal theories, that underpin the reasons to propose studying the relationship in the manner you plan. (ii) Empirical research - papers similar to what you plan to do, and helpful to interpret your findings. Done similar work but in the past, similar but different sample, similar methodology.

End this section by asking the research question.

Data and methodology - Describe and explain your choice of sectors, and explanatory variables, and sample period (why pre-gfc and post gfc). Say where you get data from.

Need two pages of APA references

Attachment:- Impact of interest rate changes.rar