Volume 7, Issue 1 & 2 (double issue): … free online access to latest research in Finance, Risk and Accounting!

ACRN Journal of Finance and Risk Perspectives
Vol. 7, Issue 1 & 2, ISSN 2305-7394


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online first, more articles in press




pdf Interest Rates and Investors Behaviour: Cointegration and Granger Causality


Mohammad Sami Ali
The Department of Banking and Financial Sciences, Zarqua University, Jordan

Abstract
Research Problem: The review of literature revealed that though the economy of Jordan fluctuated considerably, there is no research evaluated the impact of the volatility in the rates of interest in the perception of Jordanian investors. Research Objectives: Therefore, the study aimed at exploring the causal correlation between the weighted average time deposit interest rates and the saving deposit interest rates along with the liquidity of Amman stock exchange as main proxies for investors’ behaviour.
Research Methodology: To achieve the aim of this research, the study employed empirical techniques like the ADF, Johansen co-integration test, VAR model and the short-run granger causality test to analyze a time series data covering the period Q1/2000-Q4/2016. Findings: Consequently, the study found that the tested variables became stationary only after converting them into the first difference. However, results from the Johansen test proved that the examined variables are not integrated on the long-run. Similarly, findings from the VAR analysis and the granger causality tests revealed that there is no short-run causality running from the volatility in interest rates towards the market’s liquidity as captured by the value traded and the turnover ratio.
Implications: Moreover, the study concludes that investors of Jordan can be classified as risk averse investors, since they are preferring to deposit their funds into the banks, though the level of interest rates is low. Eventually, the study recommends investors to rely on these rates to improve the quality of their investment decisions.
Keywords: Weighted Average Time Deposit Interest Rates; Weighted Average Saving Interest Rates; Amman Stock Exchange Liquidity; Turnover Ratio, Traded Value.