Spanish stock market sensitivity to real interest and inflation rates: an extension of the Stone two-factor model with factors of the Fama and French three-factor model

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Abstract:

This study is focussed on estimating the real interest and inflation sensitivity in Spanish market, proposing an extension of the Stone (1974) two-factor model and controlling for size and growth of the companies [Fama and French (1993) three-factor model], because of its importance in the stock sensitivity shown by previous literature. I also study the classical explanatory factors of the stock sensitivity: leverage and liquidity level of the firms. The Spanish stock response is similar to the response in other markets, and the 'size' is higher than 'growth' effect.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840600994187

Affiliations: Departamento de Analisis Economico y Finanzas, Universidad de Castilla-La Mancha, 02071 Albacete, Spain

Publication date: December 1, 2008

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