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Market Reaction of Share Prices of Developed Markets to the Change of Interest Rate 

ФИО студента: Dmitrii Novichkov

Руководитель: Elena Rogova

Кампус/факультет: St.Petersburg School of Economics and Management

Программа: Finance (Master)

Год защиты: 2021

The study examines the impact of changes in the interest rate on the dynamics of indices in developed countries. Three American indices and two European ones were used as stock market indices. The results obtained are compared with the impact of the change in the interest rate on the Russian market. Theoretically, it is assumed that with an increase in the interest rate, shares should react negatively, and in the case of a decrease in the rate - positively. However, some scholars argue that markets will only react when there are unexpected rate changes. There is also no consensus on how the financial sector reacts to a change in the interest rate. Event study analysis was performed to test hypotheses. We found that the impact of the interest rate differs significantly not only between Russia and the developed market, but also between the US and the EU. Also, we do not find a significant impact of unexpected events on the market dynamics. The financial market responds in the same way as the basic index. Interest words: interest rate; stocks, event study, index; market reaction.

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