Market, interest rate, and exchange rate risk effects on financial stock returns during the financial crisis: AGARCH-M approach

Figures & data

Table 1. Banking sector stock return effects: estimated four-variate GARCH (1, 1) model during the financial crisis

	Variables
During the financial crisis	Exchange rate				Interest rate short-term				Interest rate long-term				Market return
Country	β12	1/12	A12	B12	β13	1/13	A13	B13	β14	1/14	A14	B14	β15	1/15	A15	B15
Germany	0.020^*** (0.035)	0.042^* (0.000)	0.021 (0.954)	−0.145 (0.952)	0.000 (0.119)	0.055^* (0.000)	3.793 (0.336)	−14.39 (0.226)	0.000 (0.865)	0.054^* (0.000)	−0.048^* (0.000)	−13.7^*** (0.098)	−0.000 (0.712)	0.054^* (0.000)	−4.917^* (0.000)	0.845 (0.852)
US	0.000^* (0.000)	2.113^* (0.000)	0.029^*** (0.054)	−0.005^*** (0.088)	0.122^* (0.000)	0.456^*** (0.022)	0.0017^*** (0.061)	−0.000 (0.877)	0.270^* (0.000)	0.858^* (0.000)	−0.016 (0.622)	−0.136^*** (0.093)	0.231 (0.66)	1.769 (0.034)	−0.034 (0.232)	-(0.0126^*** (0.0522)
Greek	0.065 (0.752)	0.271 (0.494)	−0.254 (0.780)	−0.281 (0.895)	−0.379^* (0.000)	1.436^* (0.000)	0.976^* (0.000)	−1.345^* (0.000)	−0.227 (0.248)	0.237 (0.463)	−0.522^* (0.000)	−0.248 (0.658)	0.118 (0.666)	0.298 (0.371)	0.144 (0.034)	−0.515 (0.585)
France	0.096 (0.535)	0.477^* (0.000)	−0.818^* (0.000)	0.250 (0.351)	−0.122^* (0.000)	1.484^* (0.000)	0.217^*** (0.096)	−1.760^* (0.000)	0.497^* (0.000)	0.856^* (0.000)	0.066 (0.677)	−0.302 (0.102)	0.497^* (0.000)	1.056^* (0.000)	0.234^* (0.000)	0.144^*** (0.021)
UK	−0.002^*** (0.050)	0.491^*** (0.073)	−7.488 (0.848)	−124.7 (0.529)	0.008 (0.838)	0.922^* (0.000)	0.020^*** (0.019)	66.42^* (0.000)	0.1526 (0.387)	0.7100^*** (0.022)	0.054 (0.194)	68.13^* (0.000)	0.239^*** (0.036)	0.475^*** (0.076)	0.050^* (0.000)	66.50^* (0.000)
Italy	1.296^*** (0.039)	1.001^* (0.000)	−0.002 (0.860)	−0.124^* (0.000)	−0.078 (0.109)	1.270^* (0.000)	0.880^** (0.005)	1.523^* (0.000)	−0.377^* (0.000)	0.871^* (0.000)	0.284^*** (0.010)	−0.477^* (0.000)	−0.532^*** (0.009)	0.877^* (0.000)	−0.151^*** (0.007)	−0.320^* (0.000)
China	−0.015 (0.326)	0.066 (0.939)	0.000 (0.100)	0.015^* (0.000)	−0.000 0.323)	0.060 (0.944)	0.000 (0.314)	0.017^* (0.000)	n/a	n/a	n/a	n/a	0.975^* 0.000)	0.291 (0.128)	0.000^** (0.003)	0.017^* (0.000)
Spain	−0.000 (0.142)	0.295 (0.420)	−0.022 0 (0.815)	−0.142^*** (0.089)	0.086^*** (0.008)	−0.192^*** (0.006)	−0.205 (0.735)	−0.731 (0.403)	0.025 (0.871)	−0.217 (0.129)	0.216 (0.456)	0.036 (0.933)	1.310^* (0.000)	−0.038 (0.478)	−5.232 (0.475)	−8.766 (0.440)

^* Significance at the 1% level.

^** Significance at the 5% level.

^*** Significance at the 10% level.

Table 2. Financial sector stock return effects: estimated four-variate GARCH (1, 1) model during the crisis financial

During the financial crisis	Variables
	Exchange rate				Interest rate short-term				Interest rate long-term				Market return
Country	β12	1/12	A12	B12	β13	1/13	A13	B13	β14	1/14	A14	B14	β15	1/15	A15	B15
Germany	−2.272^*** (0.025)	1.591^*** (0.012)	0.086^* (0.000)	0.045 (0.135)	0.115^* (0.001)	0.551^*** (0.039)	−0.099 (0.796)	0.101 (0.874)	0.566^* (0.000)	0.603^** (0.002)	−0.096 (0.588)	0.359^*** (0.094)	1.64^* (0.000)	0.649^* (0.000)	0.014 (0.771)	0.094 (0.811)
US	0.000^* (0.000)	1.767^* (0.000)	−0.049 (0.852)	0.049 (0.889)	0.070^* (0.000)	0.808^* (0.000)	0.001 (0.999)	−0.006 (0.999)	0.195^* (0.000)	0.859^* (0.000)	0.006 (0.999)	−0.006 (0.999)	0.753^*** (0.038)	0.649 (0.239)	0.001 (0.999)	−0.006 (0.999)
Greek	0.691^** (0.002)	0.055 (0.890)	0.018 (0.974)	−13.409 (0.258)	−0.210^*** (0.055)	1.458^** (0.002)	0.075 (0.774)	−0.439 (0.276)	0.298 (0.181)	0.995^*** (0.008)	0.224 (0.232)	0.591 (0.182)	−0.680^*** (0.024)	1.129^** (0.002)	0.114 (0.300)	−0.235 (0.126)
France	−0.127 (0.204)	0.378^* (0.000)	17.16 (0.631)	609.4 (0.264)	−0.076^* (0.000)	0.958^* (0.000)	−0.066 (0.857)	1.472 (0.676)	0.346^* (0.000)	0.596^* (0.000)	−0.832^*** (0.003)	−4.027 (0.185)	0.316^* (0.000)	0.702^* (0.000)	−0.838 (0.166)	−5.683 (0.395)
UK	−0.001 (0.208)	0.589^*** (0.009)	−143.4^* (0.000)	246.4 0.108)	0.015 (0.640)	0.801^* (0.000)	0.227 (0.000)	−1.72^* (0.000)	0.114 (0.411)	0.649^*** (0.008)	0.220^* (0.000)	1.805^* (0.000)	0.132 (0.149)	0.564^*** (0.011)	0.237^* (0.000)	−1.70^* (0.000)
Italy	0.026 (0.918)	0.930^* (0.000)	−0.016 (0.847)	−0.220^*** (0.060)	−0.056^** (0.002)	1.045^* (0.000)	26.98 (0.4491)	932.1^* (0.001)	−0.377^* (0.000)	0.871^* (0.000)	−0.362^*** (0.040)	−1.244 (0.480)	0.047 (0.581)	0.953^* (0.000)	0.016 (0.725)	0.332 (0.405)
China	−0.010 (0.235)	0.360 (0.462)	0.024^*** (0.023)	−0.119^* (0.000)	−0.000 0.235)	0.360 (0.462)	−1.005^* (0.000)	0.436 (0.312)	n/a	n/a	n/a	n/a	−0.056 (0.596)	0.952^* (0.000)	0.173^* (0.000)	−0.196^* (0.000)
Spain	0.033 (0.288)	0.170^*** (0.013)	0.088 (0.313)	0.566^*** (0.074)	−0.163 (0.257)	0.027 (0.827)	0.886^*** (0.033)	0.639 (0.778)	1.353^* (0.000)	0.357^* (0.000)	0.176 (0.510)	−0.613 (0.681)	−0.001^** (0.004)	1.585^*** (0.097)	−15.14^*** (0.068)	−7.199 (0.858)

^* Significance at the 1% level.

^** Significance at the 5% level.

^*** Significance at the 10% level.

Table 3. Insurance sector stock return effects: estimated four-variate GARCH (1, 1) model during the financial crisis

During the financial crisis	Variables
	Exchange rate				Interest rate short-term				Interest rate long-term				Market return
Country	β12	1/12	A12	B12	β13	1/13	A13	B13	β14	1/14	A14	B14	β15	1/15	A15	B15
Germany	−1.477^* (0.000)	1.22^*** (0.011)	0.051 (0.188)	−0.025 (0.748)	0.077^*** (0.006)	0.554^*** (0.008)	2.076^*** (0.016)	3.132^* (0.000)	0.420^* (0.000)	0.609^* (0.000)	−0.636^*** (0.063)	0.471 (0.296)	1.222^* (0.000)	0.644^* (0.000)	0.099 (0.147)	0.090 (0.152)
US	0.000^* (0.000)	0.890^* (0.000)	0.049 (0.797)	0.049 (0.594)	0.010 (0.113)^***	0.750^* (0.000)	0.033 (0.998)	0.044 (0.994)	0.052^* (0.000)	0.645^* (0.000)	0.033 (0.998)	0.044 (0.994)	0.469^** (0.002)	0.194 (0.387)	0.033 (0.998)	0.044 (0.994)
Greek	0.022 (0.368)	0.946^* (0.000)	0.195 (0.535)	−27.059^* (0.000)	−0.088 (0.080)	0.970^* (0.000)	−11.42^*** (0.009)	−36.34^*** (0.043)	0.079 (0.258)	0.979^* (0.000)	3.506^* (0.000)	−7.410^*** (0.052)	−7.300^*** (0.030	−2.064^* (0.000)	1.248^* (0.000)	−3.792^*** (0.018)
France	−0.074 (0.662)	0.966^* (0.000)	−3.969 (0.903)	−369 (0.437)	−0.015 (0.509)	1.074^* (0.000)	−0.074 (0.871)	−2.247 (0.493)	−0.160 (0.144)	0.834^* (0.000)	0.754^*** (0.006)	1.413 (0.559)	−0.043 (0.605)	0.900^* (0.000)	0.197 (0.786)	5.018 (0.410)
UK	−0.000 (0.485)	0.750^* (0.001)	0.178^* (0.000)	−0.277^* (0.000)	0.049 (0.136)	0.832^* (0.000)	−7.952^* (0.000)	5.740^*** (0.007)	0.238^*** (0.094)	0.535^* (0.030)	−1.983^* (0.000)	1.384^*** (0.055)	0.086 (0.366)	0.716^** (0.002)	0.501^* (0.000)	−0.415^* (0.000)
Italy	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
China	−0.002 (0.881)	−1.614 (0.114)	0.047^* (0.000)	−0.111^* (0.000)	−0.000 (0.878)	−1.617 (0.113)	−2.007^* (0.000)	0.376 (0.272)	n/a	n/a	n/a	n/a	0.109^*** (0.003)	−1.514^* (0.000)	0.189^* (0.000)	−0.176^* (0.000)
Spain	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a

^* Significance at the 1% level.

^** Significance at the 5% level.

^*** Significance at the 10% level.

Table 4. LR tests of restrictions for financial sector during the financial crisis

	Variables
	Banking sector during the financial crisis								Financial service during the financial crisis								Insurance sector during the financial crisis
Country	H1: 1/12 = 0	H2: 1/13 = 0	H3: 1/14 = 0	H4: 1/15 = 0	H5: β12 = 0	H6: β13 = 0	H7: β14 = 0	H8: β15 = 0	H1: 1/12 = 0	H2: 1/13 = 0	H3: 1/14 = 0	H4: 1/15 = 0	H5: β12 = 0	H6: β13 = 0	H7: β14 = 0	H8: β15 = 0	H1: 1/12 = 0	H2: 1/13 = 0	H3: 1/14 = 0	H4: 1/15 = 0	H5: β12 = 0	H6: β13 = 0	H7: β14 = 0	H8: β15 = 0
Germany	78.136^* (0.000)	2614.677^* (0.000)	14.8933^* (0.000)	667.162^* (0.000)	87.620^* (0.000)	101.487^* (0.000)	103.300^** (0.002)	28.020^* (0.000)	4.090^*** (0.0431)	32.4207^* (0.000)	36.4790^* (0.000)	142.18^* (0.000)	199.351^* (0.000)	90.123^* (0.000)	4.091^* (0.000)	67.265^* (0.000)	2.293 (0.1298)	69.018^* (0.000)	103.30^* (0.000)	101.288^* (0.000)	4.091^*** (0.043)	175.812^* (0.000)	83.767^* (0.000)	79.228^* (0.000)
US	35.782^* (0.000)	126.860^* (0.000)	32.450^* (0.000)	13.223^* (0.000)	8.3403^** (0.003)	4.895^*** (0.0269)	0.0211^* (0.884)	123.203^* (0.000)	22.665^* (0.000)	17.819^* (0.000)	83.183^* (0.000)	11.152^* (0.000)	97.329^* (0.000)	105.49^* (0.000)	79.334^* (0.000)	87.010^* (0.000)	96.547^* (0.000)	70.050^* (0.000)	67.49^* (0.000)	96.946^* (0.000)	79.334^* (0.000)	104.961^* (0.000)	98.024^* (0.000)	112.02^* (0.000)
Greek	5.893^*** (0.015)	104.792^* (0.000)	121.235^* (0.000)	131.472^* (0.001)	16.479^* (0.000)	28.864^* (0.000)	47.824) (0.000^*	76.966^* (0.000)	467.31^* (0.000)	99.771^* (0.000)	429.40^* (0.000)	111.20^* (0.000)	16.299^* (0.000)	10.938^* (0.000)	46.928^* (0.000)	54.259^* (0.000)	63.097^* (0.000)	81.593^* (0.000)	59.37^* (0.000)	86.5010^* (0.000)	65.052^* (0.000)	88.957^* (0.000)	73.489^* (0.000)	71.160^* (0.000)
France	165.033 (0.000)	224.077^* (0.000)	227.843^* (0.000)	218.701^* (0.000)	82.527^* (0.000)	91.168^* (0.000)	91.047) (0.000^*	85.463^* (0.000)	120.663^* (0.000)	90.452^* (0.000)	13.826^* (0.000)	157.18^* (0.035)	58.067^* (0.000)	72.377^* (0.000)	88.977^* (0.000)	85.546^* (0.000)	31.779^* (0.000)	37.812^* (0.000)	38.59^* (0.000)	37.782^* (0.000)	88.977^* (0.000)	71.940^* (0.000)	71.059^* (0.000)	74.754^* (0.000)
UK	27.1477^* (0.000)	6.1260^*** (0.013)	260.593^* (0.000)	225.232^* (0.000)	86.940^* (0.000)	71.450^* (0.000)	71.829^* (0.000)	80.710^* (0.000)	500.648^* (0.000)	131.24^* (0.000)	19.370^* (0.000)	110.34^* (0.000)	88.112^* (0.000)	100.86^* (0.000)	96.039^* (0.000)	96.494^* (0.000)	42.585^* (0.000)	17.933^* (0.000)	93.18^* (0.000)	26.313^* (0.000)	96.039^* (0.000)	101.755^* (0.000)	82.627^* (0.000)	75.727^* (0.000)
Italy	0.0047^* (0.944)	17.895^* (0.000)	82.421^* (0.000)	31.413^* (0.000)	24.592^* (0.000)	28.481^* (0.000)	70.832^* (0.000)	95.674^* (0.000)	91.014^* (0.000)	60.117^* (0.000)	94.302^* (0.000)	4.370^*** (0.036)	31.697^* (0.000)	12.129^* (0.000)	77.208^* (0.000)	80.541^* (0.000)	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
China	8.894^** (0.002)	1.334 (0.2479)	n/a	1.471 (0.158)	35.943^* (0.000)	51.341^* (0.000)	n/a	71.636^* (0.000)	28.053^* (0.000)	38.882^* (0.000)	n/a	29.911^* (0.000)	91.277^* (0.000)	93.298^* (0.000)	n/a	92.710^* (0.000)	84.404^* 0.000)	83.568^* (0.000)		8.630^* (0.003)	73.513^* (0.000)	73.022^* (0.000)		70.832^* (0.000)
Spain	90.903^* (0.000)	94.259^* (0.000)	93.450 (0.430)	111.015^* (0.000)	10.512^* (0.000)	27.618^* (0.000)	29.323^* (0.000)	13.509^* (0.000)	7.078^*** (0.007)	0.0026 (0.958)	19.098^* (0.000)	16.012^* (0.000)	35.746^* (0.000)	10.869^* (0.000)	68.533^* (0.000)	81.646^* (0.000)	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a

^* Significance at the 1% level.

^** Significance at the 5% level.

^*** Significance at the 10% level.