Mindset of Finance

Nicholas Tessaromatis*

Knowledge of the interest rate sensitivity of stocks is important in many areas of

investment and finance. This paper makes three contributions to the existing

literature: (a) it provides estimates of stock sensitivity to changes in nominal and real

interest rates and expected inflation (b) it provides estimates of the degree of

indexation of future growth expectations to changes in nominal and real interest rates

and expected inflation and (c) examines whether government regulation, cyclicality of

future cash flows and growth versus value characteristics of stocks can explain the

differences in interest rate sensitivities across stocks.

Keywords: stocks market sensitivity to interest rates and inflation, equity duration,

determinants of interest rate sensitivity

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*Athens Laboratory of Business Administration (ALBA), Athinas Avenue and 2A

Areos Street, 166 71 Vouliagmeni, Athens, Greece, phone: (+30) 210 896 4531, fax:

(+30) 210 896 4737, email: ntessaro@alba.edu.gr.