INTEREST-RATE RISK AND THE PRICING OF DEPOSITORY FINANCIAL INTERMEDIARY COMMON-STOCK - EMPIRICAL-EVIDENCE

Using the likelihood ratio test, this paper presents evidence that interest-rate risk is priced. These results are consistent with earlier findings presented by Sweeney and Warga, based on a different sample and methodology. The statistical results further reveal that failure to discern significant interest-rate premia is attributable to insufficient rate sensitivity rather than being an outcome of monetary policy (i.e., inadequate rate volatility). © 1990.