Effect of the Use of Derivative Instruments on Stock Returns: Evidence from Banks in Emerging and Recently Developed Countries
LSAF working paper number 2013.20.
21 Pages Posted: 15 Aug 2014
Date Written: January 1, 2013
Abstract
The purpose of the paper is to examine the impact of derivatives usage on bank performance. Four derivatives are used: forward, futures, options, and swaps. The bank performance is measured by daily stock returns during the period 2003-2009. The sample is composed of 74 banks from both emerging and “recently developed” countries. The findings reject usual hypothesis by showing a negative effect of derivatives on performance in such countries. The main conclusion rejects the thesis stipulating that derivatives are beneficial for banks, as for developed countries.
Keywords: derivatives, banks, stock returns, emerging countries, panel econometrics
JEL Classification: G21, G32
Suggested Citation: Suggested Citation