How do changes in interest rates influence the values of stocks? Would the dividend discount and economic top-down analysis play a role? Discuss in your answer.
As interest rates increase the required rate of return from the stock increases. Remember that required rate of return from stock is
=Risk free interest rate + beta*risk premium
As interest rates go up, the required return from the stock also go up. The increase in required rate of return will mean that the ...
Changes in interest rates are studied.