Which stocks are driven by which interest rates?

This paper analyzes the return sensitivities of real estate value and growth stocks to changes in five different interest rate proxies. Using a global sample 352 listed companies from 12 countries as test object, we find that are more sensitive than short-term rate. finding is consistent with theory investors shorter investment horizons trade off high initial yield against lower-risk rates. In contrast, long-term rate, which stronger impact on present future cash flows stocks. We also credit yield. Because costs have direct firm’s cost capital, this result risk-based theories premium, argue riskier because they tend higher leverage greater default probability.