A new model to measure the effects of price to book ratio and interest rate on share price volatility of financial institutions in emerging markets
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Date
2019
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
The development of studies in the field of trading activities in emerging markets are taking
relevance in the last time (Leite, Klotzle, Pinto & Ferreira da Silva, 2018). This study attempts
to be part of existing literature on the topic of trading opportunities in developing nations. The
present research objective was to design a new model to measure the effects of price to book
ratio as a fmancial indicator related to bank share prices and interest rates on share price
volatility of fmancial institutions in emerging economies. The data analysis method used in
this academic work was regression analysis. This was done by developing multiple regression
models in Microsoft Excel to fmd relationships between variables of the study. The model
includes three variables: one dependent variable (share price volatility) and two independent
variables (price to book ratio and interest rates). Secondary sources such as journal articles
and the publicly available online database for the Central Bank of Brazil were used to collect
information. The model designed was implemented to test its validity in the Central Bank of
Brazil for the period December 2016 to September 2018. The researcher found no relationship
between price to book ratio and interest rates and share price changes in the Central Bank of
Brazil from December 2016 to September 2018. The researcher interpreted this to mean that
changes in the price of shares of the Central Bank of Brazil were not predicted by price to
book ratio and yields in the period from December 2016 up to September 2018. It is
considered that fmancial institutions must have instruments to measure and control financial
and macroeconomic indicators in the banking sector, such as share prices and yields
indicators, to contribute to increase fmancial growth by making informed decisions. This is
an academic professional tool to be used by researchers, students, fmancial managers,
investors, policymakers and shareholders as a source of literature for studies. This research
has contributed to existing literature on trading activities in emerging countries, and how to
study fmancial and macroeconomic variables that can influence stock price direction in
developing nations, such as price to book ratio and yields
Description
A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Business Administration Finance
Keywords
Price to book ratio, Interest rates, Share price volatility, Emerging markets, Business model, Namibia, University of Namibia