Ahmed El-Masry is also affiliated to Mansoura University, Egypt.
Exchange Rate and Interest Rate Exposure of UK Industries Using First-order Autoregressive Exponential GARCH-in-mean (EGARCH-M) Approach
Article first published online: 4 JUL 2013
© 2013 The University of Manchester and John Wiley & Sons Ltd
The Manchester School
Volume 82, Issue 4, pages 409–464, July 2014
How to Cite
Olugbode, M., El-Masry, A. and Pointon, J. (2014), Exchange Rate and Interest Rate Exposure of UK Industries Using First-order Autoregressive Exponential GARCH-in-mean (EGARCH-M) Approach. The Manchester School, 82: 409–464. doi: 10.1111/manc.12029
- Issue published online: 2 JUN 2014
- Article first published online: 4 JUL 2013
- Manuscript Revised: 23 APR 2013
- Manuscript Received: 27 MAR 2012
We examine the sensitivity of 31 UK non-financial industries to exchange and interest rate exposure from 1990 to 2006 using first-order autoregressive exponential GARCH-in-mean (EGARCH-M) model. We find that the stock returns of UK industries are more affected by long-term interest rate risk than exchange rate risk and short-term interest rate risk. Moreover, the euro introduction decreases exchange and interest rate exposure and competitive industries exhibit higher returns volatility than concentrated industries. Furthermore, for most UK industries: increased risk does not necessarily lead to an increase in returns and persistence of volatility is much higher in some industries than others.