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Open AccessArticle

Performance of Alternative Estimation Procedures of the Implied Equity Duration in a Small Stock Market

1
Facultad de Empresa y Comunicación, Universidad Internacional de La Rioja, 26006 Logroño, Spain
2
Facultad de Ciencias Empresariales, Universidad de Huelva, 21002 Huelva, Spain
*
Author to whom correspondence should be addressed.
Sustainability 2020, 12(5), 1886; https://doi.org/10.3390/su12051886
Received: 23 January 2020 / Revised: 19 February 2020 / Accepted: 26 February 2020 / Published: 2 March 2020
(This article belongs to the Special Issue Financial Risk Management and Sustainability)
This paper is focused on the measurement of interest rate risk of nonfinancial firms. The measurement is the initial step in the risk management, which, in the context of financial risks, it is expected to lead to better levels of enterprises’ financial sustainability. Concretely, we checked the performance of alternative estimation procedures of the implied equity duration as a measure of the exposure to interest rate risk of firms listed on a small stock market. Previous evidence in the US stock market shows that when the implied equity duration is computed using industry-specific parameters instead of market parameters, significant differences arise in their absolute and relative values and even in their ranking. In this paper, we checked the robustness of these results when we moved to a smaller stock market. To do so, we replicated previous analyses carried out in the Spanish stock market but using alternative estimation procedures. We conclude that significant differences arise in the implied equity duration estimations when we consider industry-specific parameters instead of market parameters. This finding in a small stock market is in line with previous evidence found for the US stock market. View Full-Text
Keywords: financial sustainability; financial risk; interest rate risk; stock duration financial sustainability; financial risk; interest rate risk; stock duration
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Fullana, O.; Toscano, D. Performance of Alternative Estimation Procedures of the Implied Equity Duration in a Small Stock Market. Sustainability 2020, 12, 1886.

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