Great Expectations by Charles Dickens Essay Example for Free

Great Expectations by Charles Dickens Essay Human nature is the psychological and social qualities that characterize humankind. Human nature separates humans from the rest of the animal kingdom. The underlining theme of human nature is evident in Great Expectation by Charles Dickens use of his characters. A main characteristic that Dickens displays is friendship. The friendship between Pip and Herbert is strong. Herbert was significant to Pip’s growth in social class and eventual to his revelation. â€Å"Friendship was one of the human characteristics Dickens enjoyed†¦by associating fellowship with good characters and deeds, he made it known that he admires friendship. † (MacAndrew 168) Herbert aided Pip when he first came to London and made the transition an easy one. Herbert helped filled in the blanks for Pip when he was lost. Herbert saved Pip’s life when Orlick tried to kill him. When Pip needed someone to turn to Herbert was always there. In return of Herbert’s friendship Pip also helped him. Pip used the money he was getting from Magwitch to finance Herbert dream of becoming a business owner. This was a true friendship that did not falter throughout the novel. Friendship is one of the few good characteristics that Dickens indicates throughout the novel. Dickens goes beyond the bond of friendship to the bond of love. Herbert was not the only person that assisted Pip. Joe was another component to Pip’s success. Joe had deeper feelings then friendship towards Pip. Joe loved Pip like they were brothers. Joe was a simple, honest, hardworking man. Joe was a model of the man everyone should try to be. Joe was there in the beginning for Pip when he was getting picked on by Tickler or being â€Å"brought up by hand† by Mrs. Joe. Although Pip turned his back against Joe he was there in the shadows. Joe as simple as he was knew that Pip was leaving him behind. â€Å"Not wishing to intrude I have departed fur you are well again dear Pip and will do better without.† (Dickens 439) Joe knew that he would only be holding Pip back he felt like he was a burden to Pip. Joe was following the notion if you love something you should set it free. Even though Joe didn’t have much he paid Pip’s debts because of his unconditional love for Pip. Joe tried his best to protect Pip and not to bother him. This unconditional love that Joe employed over Pip became essential for Pips growth. Another good human characteristic that Dickens expresses is generosity. This came from the most unlikely person, Magwitch. Magwitch help Pip like a father type would. Magwitch is one of the characters that play a role of a parent. â€Å"Look’ee here, Pip. I’m your second father. You’re my son—more to me nor any son. I’ve put away money, only for you to spend.† (Dickens 329) Magwitch had the same love for Pip as Joe did. Magwitch did not care about his money, but instead he cared about Pip’s happiness and his dream. Magwitch was a convicted criminal that made Pip dreams come true. Although he was a convict he was morally good. He did everything he could to help Pip become the man he is at the end of the novel. â€Å"Lord strike me dead!’ I says each time—and I goes out in the open air to say it under the open heavens—‘but wot, if I gets liberty and money, I’ll make that boy a gentleman!’ And I done it.† (Dickens 351) Magwitch was the secret benefactor that was founding Pip’s journey. The generosity that Pip showed Magwitch left such impact he swore that he would repay Pips generosity. One act of random kindness change Pip’s life forever. Magwitch generosity towards Pip went far beyond the generosity that Pip showed him. Magwitch generosity did not go unnoticed by Pip though. Near the end of the novel Pip return the generosity by helping Magwitch. Dickens did not only show the positives of human nature, but also the negatives. One of the negative characteristics that Dickens looked at was cruelty. â€Å"Dickens believed the darkest facet of human nature was cruelty. He created many characters who displayed this moribund characteristic†¦by creating dark characters, Dickens made the reader disgusted with them.† (The Saturday Review 69) Dickens used a span of characters from the protagonist to minor characters to demonstrate cruelty. This was vital to Pip’s and Estella revelation because it show them there immature ways. Pip experience cruelty first hand from the very beginning. Pip’s childhood memories are frightening for him because of the torment he received from Tickler and Mrs. Joe. Joe could only protect Pip so much, but he could not save him from everything. Pip was not so kind towards Joe as Joe was to Pip. Estella was another cruel character because she did not have a heart towards men. She would use her beauty to make men fall in love with her, but would not return the love . She did not have any affection because it was driven from her at a very early age. Dickens displayed this tactic of cruelty not only in Estella, but also in Compeyson. Compeyson the man that was supposed to married Miss Havisham was a self-centered man. He tricked Miss Havisham to fall in love with him, but when he had access to her money he left on their wedding day. Compeyson also tricked Magwitch. Compeyson and Magwitch were arrested together, but Compeyson organize a plan that got him seven years in jail while Magwitch got fourteen years. The pain that Compeyson left to Miss Havisham and his manipulation of the sentence hearing gave birth to monsters seeking revenge. Dickens use of cruelty brings to life another bad human characteristic, revenge. The cruelty that Compeyson inflected lead Miss Havisham to seek revenge. Tainted from her one experience Miss Havisham distrusted all men. Miss Havisham played the other role of being a parent. She adopted Estella solo based on concept that all men were like Compeyson. Miss Havisham is the one who created Estella to be this heartless creature. Estella was one of Miss Havisham pawns in her plan of revenge. â€Å"Estella doesn’t play into her games anymore and makes her own living with Drummle†¦Miss Havisham tries to control Pip and seduced him into the thoughts of being with Estella forever.† (Chesterton 199) Pip was the other pawn that Miss Havisham was playing. â€Å"But when I fell into the mistake I have so long remained in, at least you lead me on?† said Pip â€Å"Yes, I let you on.† Miss Havisham replied. (Dickens 334) Miss Havisham convinced Pip to think that Estelle was his soul mate knowing Estella would never return the love. Miss Havisham spent the rest of her life on obtaining revenge on men. Like Miss Havisham, Magwitch sought revenge. Compeyson was also the reason behind Magwitch plan to seek revenge. Unlike Miss Havisham, Magwitch wanted direct revenge on Compeyson. Compeyson also used Magwitch for his own personal gain. This obsession leads to Magwitch unhappiness. When Magwitch achieves his goal of revenge he does not gain happiness, but rather despair. Dickens demonstrations of revenge go against any notion that revenge is good, but rather we should forgive those who trespass against us. Ungratefulness was a part of the collection of negative human characteristics that Dickens expressed. When Pip grows in social class he is ungrateful towards those below him. Pip tries to forget past and where he came from. Pip’s remarks in page 89 â€Å"Estella would consider Joe, a mere blacksmith: how think his boots, and how coarse his hands.† He treats Joe and Biddy like they are beneath him, but they are morally better people. â€Å" He rejects the love that like those Joe and Biddy offer, and he feels he will not see himself as worthy, unless he meets the approval of the cold and haughty Estella† (Whipple 381) All Pip cares for is himself and his goals. Instead of staying with Joe while he was in town he rented a room at the blue boar. Pip wanted no part of his old life and did not want it interrupt his new life. â€Å"Could have kept him away by paying money, certainly would have.† (Dickens 217) Even when Joe extended his hand to help Pip he was so superficial at the time he ignore him. Pip forgot all the things that Joe did for him. Pip became ungrateful during his transformation. Pip conflict was self-inflected with his dream of becoming a gentleman. Charles Dickens demonstrates the aspects of human nature throughout his novel Great Expectations through the use of his characters. Dickens also illustrates the positives and negatives of human nature. â€Å"Suffering has been stronger than all other teaching, and has taught me to understand what your heart used to be. I have been bent and broken, but I hope into a better shape.† (Dickens 453) Pip and Estella turmoil was self-inflected. They faced many hard ships, but only when they grasp the idea on what truly matters in life will they find their bliss. Bibliography Areview of â€Å"Great Expectations,† in the Saturday Review. London, Vol. 12. No. 299, July 20, 1861, pp. 69-70 Brattin, Joel J.. Dickens Quarterly, Sep2012, Vol. 29 Issue 3, p285-287, 3p. (Book Review) Brown, James M. Dickens: Novelist in The Market-Place. Totowa, NJ: Barnes and Noble, 1982. Chesterton, G.K. â€Å"Great Expectations,† in his Appreciations and Criticisms of the Works of Charles Dickens, E.P. Dutton Co., 1911, pp. 197-206 Cohen, William A.. Critical Insights: Great Expectations, 2010, p215-268, 54p. (Literary Criticism) Gold, Joseph. Charles Dickens: Radical Moralist. Minneapolis: U of Minnesota P, 1972. Kirk, Neville. Labour and Society in Britain and the USA. London: Scholar P, 1994. Levine, Caroline. Critical Insights: Great Expectations, 2010, p128-146, 19p. MacAndrew, Elizabeth. Critical Insights: Great Expectations, 2010, p161-176, 16p. (Literary Criticism) Mittleman, Leslie B.. Masterplots, Fourth Edition, November 2010, p1-4. (Work Analysis) Author Name: Dickens, Charles Tobin, Mary Ann. Critical Insights: Great Expectations, 2010, p55-67, 13p. (Literary Criticism) Whipple, Edwin P. â€Å"Reviews and Literary Notices: Great Expectations,† in the Alantic Monthly, Vol. VIII, No. XLVII, September, 1861, pp. 380-382.

The Importance of the Dance in A Dolls House Essay -- A Dolls House E

The Importance of the Dance in A Doll's House    Dancing is a beautiful form of expression that reveals a good deal about a person in a matter of minutes.   Characters that dance in plays and novels usually flash some sort of underlying meaning pertaining to their story, shining light on themselves, other characters, and the movement of the action.   In Ibsen's A Doll's House, Nora's performance of the tarantella summarizes the plot of the entire play.      Take, for example, Torvald's attitude towards Nora's offbeat movements.   Torvald plays the piano for Nora initially, but becomes so frustrated with Nora's dancing that he abandons his tune and attempts to re-teach Nora the tarantella.   This simple confrontation reflects the main action; Torvald is the one who provides Nora with music and who had previously taught Nora how to dance, just like he is the one who gives her a home and has sculpted her into his ideal wife.   Nora cannot dance rhythmically to Torvald's song because both her lies and Torvald's strong belief in app...

How Technology Affects the Business Environment Essay

During the last century, the world has been through a technological revolution. We have in few years moved from being a world where it could take months to receive a message, to being a world where it takes microseconds. Within most industries, technology is a very important factor to succeed. Especially in certain industries, like energy, transport and financial services, technological innovations have been vital to make those industries develop into what they are today. Companies are always struggling to acquire better technology, so that they in a more efficient way can produce their products or carry out their services. It is therefore important for companies to keep an eye on new technological innovations. The technological elements of the external environment are a part of the LoNGPEST analysis, which is being used to scan a firms environment, so it in a best possible way can adopt to it. In this essay, I will attempt to explain how technology has been a vital reason for the globalization, and how it has made the world more efficient. There is no doubt that the development of information and communications technology is one of the causes for globalization. The table below shows the reduction in communicating and travelling prices. According to the table, the price of a 3 minutes phone call have been reduced by 98,6%. The reduction in air transport costs per mile is 74%. There is no doubt that such reductions encourage companies to expand geographically. In addition, the rapid growth of the internet has made it possible to share information with the rest of the world in microseconds. Eric Samuels states that one of the industries that has grown because of information technology is the financial service industry. He states that â€Å"delivery of services has become more efficient because of the application of technology.† What he is saying, is that the financial services provided are being done more effective and at a lower cost than before. By using the internet, companies can reach out to the whole world without spending a pound. In addition to claim that the financial service industry has grown due to the information technology, Dr. Nicolas Pologeorgis also states that the industry, since 1998, has gon e through a rapid geographic expansion. This especially applies to wealthy nations, like countries from Europe and USA. He claims that â€Å"customers previously served by local financial institutions are now targeted at a global level.† Dr. Pologeorgis believes that one of the reasons for this, besides deregulation and more trading between countries, is the information technology. Services like ATMs and websites is being used to develop a more efficient relationship between long distance customers and suppliers. A study about globalization of the banking industry, states that improvements in technology â€Å"have facilitated greater geographic reach by allowing institutions to manage larger information flows from more locations and to evaluate and manage risks at lower cost without being geographically close to the customer.† One example of a company from this industry that expanded geographically in the 90’s is Goldman Sachs (GS). I 1990, Robert Ruding and Stephen Friedman decided to focus on GS global operations. During the 1990’s, GS went through a rapid geographical expansion. Today, GS has offices located in all major financial centres around the world. I have made a comparison between the growth in the financial service sector and the use of internet worldwide. It was in the 90’s that the internet use exploded. In 1995, 16 million people were connected to the internet (0,4 of world population). The table below shows that the use of internet exploded about the same time that the financial service industry, according to Pologeorgis, really started expanding geographically. However, it is not only the improvements in communication and information technology that has contributed to a more efficient and globalized world. Another industry that has been affected by improvements in technology the last century is the oil and gas industry. An article made by naturalgas states that â€Å"new innovations have reshaped the industry into a technological leader9.† A report made by the U.S. Department of energy in 1999 shows that if technology had stagnated in 1985, America would have needed twice as many wells to produce the same amount of oil and gas. However, because of technological improvement, we only need half as many wells to produce the same amount in 1999. In 1999, the America used 22 000 less wells to produce the same amount as they did in 1985. A statistical review of world energy made by BP illustrates how much oil and natural gas that has been produced in each country and worldwide from 1965-2010. Worldwide, the total development of oil has increased from 31,806,000 barrels daily in 1965, to 82,095,000 barrels daily in 2010. The development of oil has increased from 96,9 billion cubic feet daily in 1970, to 309 billion cubic feet daily in 2010. The main reason to the increase in production is off course the growing demand, but according to naturalgas it would have been impossible without the improvement in our technology. Consumption of oil increased from 30,783,000 daily in 1965 to 87,382,000 barrels daily in 2010 and consumption of gas increased from 63 billion cubic feet daily in 1965 to 306,6 billion cubic feet daily in 2010. Another industry that has developed because of new technology is the nuclear industry. Numbers taken from NEI shows that 13,5 of the world’s electricity production IN 2010, was provided by nuclear power. Furthermore, NEI states that â€Å"in total, 15 countries relied on nuclear energy to supply at least one-quarter of their total electricity†. According to NEI, one example of a country that is dependent of nuclear energy is France. 74,1 percent of the energy produced in France was generated through nuclear energy. The statistical review published by BP, shows that the consumption of electricity generated from nuclear power has increased tremendously since 1965. In 1965 the global consumption of terra hours has increased from 25,7 in 1965 to 2767,2 terra hours in 2010. FINN UT OM DAILY In this essay, I have tried to show how technology has been a vital part of both the globalization and the development of a more efficient world. I have found that information and communication technology has been important for globalization. Lower costs of travelling and communicating overseas encourage people to expand geographically. In addition, the fact that use of internet has developed into a common thing, especially in developed countries, makes customers able to do services that they could not do before. My essay also shows how the oil and gas industry have become more efficient, and how the nuclear industry has grown due to technological improvements. Reference list: Department for Business Enterprise & Regulatory Reform (2008) Globalisation and the changing UK economy, page 3 [online]. Available from: http://www.bis.gov.uk/files/file44332.pdf accessed at 22.11.2011. British Petroleum (2011) Historical data [online]. Available from: http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481 (then click on historical data) Accessed at 23.11.2011. U.S. Department of energy (1999) Environmental benefits of advance oil and exploration and production technology [online]. Available from: http://www.fe.doe.gov/programs/oilgas/publications/environ_benefits/4envben.pdf Accessed at 22.11.2011. U.S. Department of Energy http://www.fe.doe.gov/programs/oilgas/publications/environ_benefits/3innov.pdf Funding Universe, The Goldman Sachs group INC [online]. Available from: http://www.fundinguniverse.com/company-histories/The-Goldman-Sachs-Group-Inc-Company-History.html Accessed at 22.11.2011. Goldman Sachs (2011), who we are – at a glance [online]. Available from: http://www2.goldmansachs.com/who-we-are/at-a-glance/index.html Accessed at 22.11.2011. Internet World Stats (2008), internet growth statistics [online]. Available from: http://www.internetworldstats.com/emarketing.htm Accessed at 21.11.2011. Internet World Stats (March 31, 2011), internet usage statistics [online]. Available from: http://www.internetworldstats.com/stats.htm Accessed at 21.11.2011. Dr. Nicolas Pologeorgis (2009), The Globalization of Financial Services [online]. Available from: http://www.investopedia.com/articles/financial-theory/09/risk-free-rate-return.asp#ixzz1eNeBhksO Accessed at 20.11.2011. Eric Samuels (2011), Marketing of Financial Services [online]. Available from: http://www.measurethat.com/?cat=5 Accessed at 20.11.2011. Natural Gas (2010), Natural Gas and Technology [online]. Available from: http://www.naturalgas.org/environment/technology.asp Accessed at 22.11.2011. Nuclear Energy Institute (2011), world statistics, nuclear energy around the world [online]. Available from: http://www.nei.org/resourcesandstats/nuclear_statistics/worldstatistics/ Accessed at 22.11.2011. Wall Street Journal (2010), A Brief History of Goldman Sachs [online]. Available from: http://online.wsj.com/article/SB10001424052748704671904575193780425970078.html Accessed at 21.11.2011 Allen N. Berger, Qinglei Dai, Steven Ongen, David C. Smith (2002) To What Extent Will the Banking Industry be Globalized?A Study of Bank Nationality and Reach in 20 European Nations, page 3 [online] Available from: http://siteresources.worldbank.org/INTFR/Resources/banking_industry_globalization.pdf Accessed at 22.11.2011.

Theoretical Studies Of The Sensitivity Of Stock Returns Finance Essay - Free Essay Example

Sample details Pages: 13 Words: 3776 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? This chapter reviews the theoretical and empirical studies, regarding the sensitivity of stock returns of banks to interest rates and foreign exchange rates. In the course of review, the studies focussing on the interest rate are evaluated first, followed by an exploration of the studies focusing on foreign exchange rates. Finally, the empirical research that explores the effects of both interest rate and foreign exchange rates on stock returns for financial institutions are considered to help present a more accurate outline of the research that has been carried out in this field to date; and thus, help highlight this area of research for further investigation. Don’t waste time! Our writers will create an original "Theoretical Studies Of The Sensitivity Of Stock Returns Finance Essay" essay for you Create order It was observed during the preliminary research that in the past few decades, several studies have analyzed the effects of fluctuations of interest rates on the stock returns of commercial banks in the United States. 2.2 Theoretical Background The impact of market interest rates on commercial bank stock returns have increasingly concerned bank managers, investors, policy makers, and academicians as financial market conditions have become more volatile and profit margins have dwindled in recent years (Elyasiani and Mansur 2004). Most authors have thus assessed the impact of foreign exchange risk on bank stock returns using multifactor models (e.g Chamberlain et al. (1997); Choi and Elyasiani (1997) and Elyasiani and Mansur (1999)). It was observed that the studies carried out by Martin Mauer, 2003; suggested that perceptions adopted on interest rates by the financial institutions served to broaden the CAPM-based market model by including an exchange rate factor. But according to Edmister and Merriken (1988) the interest rates and exchange rate changes have a direct effect on the revenues and costs of financial institutions and that most of the largest banks in the US have a major proportion of their operations in fore ign countries (Madura and Zarruk 1995). Thus, the interest rate and exchange rate changes are only likely to substantially affect their revenue and cost streams beyond the protection that is afforded and allowed by hedging (Joseph and Vezos 2006). In the earlier years, Booth and Officer (1985) and Bae (1990) tested the effect of current and unanticipated changes in interest rate. Fraser, Madura and Weigand (2002) examined the effect of unanticipated interest rate changes. Booth and Officer, 1985 also found out that the underlying phenomenon is not present in the non financial portfolio. In contrast, Lloyd and Shick (1977) and Chance and Lane (1980) found no incremental explanatory power for interest rate changes. Therefore, all these studies strongly supported a negative effect of both current and unanticipated interest changes on bank stock returns. King and Wadhwani (1980) discussed the volatility transfer hypothesis. The volatility transfer hypothesis claims that there can be an increase in financial markets volatility levels, due to change in stocks, which in turn will lead to contagion effects. It can be surmised that the financial institutions are able to avoid this negative influence in their domestic markets, by operating in foreign operations. But it may at times lead to an extra factor of risk being introduced. Similarly, financial institutions are also said to be more unique due to the regulations and policies imposed in relation to their activities, which makes them more exposed to the fluctuations in interest rates. Thus summarizing financial institutions may invest abroad to reduce risk in the domestic market. Stock market volatility differs dramatically across international markets. [Studies on] US, UK and Japanese markets evidenced the differences in return volatility due to market thinness and share turnover. With a view to know the interdependence of stock markets located all over the world and to realize the risk returns of global diversification, this study presents the volatility in the international scenario. However, volatility is one of the most important aspects of financial market developments, providing an important input for portfolio management, option pricing and market regulations (Mollah and Mobarek 2009). Any fluctuations that take place in the area of interest rates, tends to have a significant influence on the stocks of the company (Knif and Pynnonen 2007). Needless to highlight, the eventual implications of these influences can be observed in the form of changes in stock returns. When interest rates experience an increase, the risk involved in investment also goes up; causing the required rate of returns to climb up, especially if the stocks are to remain attractive to consumers. 2.3 Interest Rates A major cause of the numerous bank failures in the 1970s and 1980s was the high volatility of interest rates and the strong interest rate sensitivity of banking institutions (Verma and Jackson). Interest rate is assumed to be one of the most important among factors that affect the stock returns and the profitability of banks in the short term; as well as in the long run (Simlai 2009). In particular, the volatility of the short-term interest rate has two opposing effects on the yield curve; the premium effect and the convexity effect. The premium effect inserts a positive impact on the long term interest rate. An increase in the volatility of the short-term interest rate induces higher expected rates for the longer maturities; whereas on the other hand, the convexity effect inserts a negative impact on the long term interest rate. An increase in volatility of the short-term interest rate increases the convexity, thereby reducing the yield for longer maturities. Thus, the premium effect dominates at the short end of the yield curve while the convexity effect dominates at the long end of the curve (Elyasiani and Mansur 2004). The significance of this phenomenon is incorporated in the fact that interest based income is a key source of income for commercial banks. It therefore comes as no surprise; that the interest rate risk is a major source of risk that commercial banks are exposed to (Amoako-Adu and Smith 2002). Changes in interest rates can also affect a banks profitability by increasing its cost of funding, reducing its returns from assets, and lowering the value of equity in a bank. Moreover, recent decades have ushered in a period of volatile interest rates, leaving the investors with more unpredictable environment to work in (Joseph and Vezos 2006). A modern day investors primary concern is now concerned around the impact of interest rates on commercial bank revenues, costs and profitability. In terms of the banks perspective, the fact that most commercial banks choose to lend long and borrow short, implies that the bank profits can decrease in case of an increase in short-term interest rate and a decrease in long-term interest rates (Elyasiani and Mansur 2004). In contrast to this a bank can be expected to benefit from a decrease in short-term interest rate and an increase in long-term interest rate. During the past years, several studies have analyzed the effects of fluctuations of interest rates on the stock returns of commercial banks in the U.S. Most studies found that bank returns exhibit a negative correlation with the changes of interest rates, while others found no significant association between the movements of the interest rates and the returns of the commercial banks (Zhu 2001). Less evidence exists regarding the factors that explain the interest sensitivity of bank stock returns across firms and through time. A banks interest rate risk is assumed to be conditioned on the following three bank specific charac teristics: change of net interest income, change of net income, and notional amounts of interest rate derivatives. These factors are observable and can be easily measured. They are useful indicators for investors to anticipate how sensitive a banks performance to interest rate risk is. If a bank successfully controls its interest rate risk, its net interest income and net income should be immunized against interest rate fluctuations. In addition to this; as banks are increasingly employing derivatives to hedge their financial risks; the national amount of interest rate derivatives for the purpose of non-trading is also analyzed. Since the financial market conditions have become more volatile in recent years, the effect of interest rate changes on bank stock returns has increasingly concerned investors, banking authorities, academicians and policy makers (Verma and Jackson 2008). The interest rate variable, thus calculated is very important for the valuation of common stocks of fi nancial institutions; because the returns and costs of financial institutions are directly dependent on the interest rates. Various authors have, therefore, examined the empirical sensitivity of stock returns of financial institutions to the changes in market interest rates (Choi, Elysiani and Kopecky 1992). Studies carried out by Edmister and Merriken (1989); as stated earlier, claimed that changes in the interest rates have a direct influence on both the revenue and expenditure of a financial institution, and as a result, this influence has an effect on the stock returns of the same financial institutions. In 1988, Kane and Unal employed a switching regression technique and found out that the interest rate sensitivity of bank, savings and loan stocks varied significantly over time. In particular, they found out that the interest rate beta shifted down sharply in the early 1980s and went back up a few years later (Kane and Unal 1988). Interest rate sensitivity of commercial bank stock returns has also been the subject of considerable research, for years now. Stone (1974) proposed a two factor model for incorporating both the market return and interest rate variables as return generating factors. Lloyd and Shick (1977) and Chance and Lane (1980) found out that the interest rate index contributed little to the return generating process of stocks of financial institutions. These findings, however, were challenged by Lynge and Zumwalt (1980), Flannery and James (1984) Booth and Officer (1985), Scott and Peterson (1986), and Bae (1990), all of whom reported considerable adverse interest rate sensitivity in stock returns of financial institutions; Elyasiani and Mansur (1999). Early studies on interest rate sensitivity, which used the two index model, focussed primarily on the exposure of interest rates on financial institutions. Even now, the exposure of the financial institutions to fluctuations of interest rates has been the subject of many empirical researche s. Most of the researches carried out, employ a two-factor model, focussing on two aspects: the association between the bank stock returns and the interest rate changes. Most studies conducted on a regular basis found out that the bank stock returns are negatively related to the changes in interest rate while others found no significant relationship between these two variables. Lynge and Zumwalt (1980) tested the interest rate sensitivity of bank stock returns by estimating several multi index models containing short- and long-term debt return indices. Song (1994) made the first study to employ the ARCH-type methodology in banking. Song analysed the ARCH-type modelling as the appropriate framework for analysis of bank stock returns. According to his results, market and interest rate risk measures of banks did indeed vary significantly over time (Elyasiani and Mansur 1998). Saunders and Yourougou (1990) examined periods of relatively stable and volatile interest rates and provi ded evidence that the interest rate sensitivity varied over time. Kwan (1991) also developed a two-index random coefficient model of bank stock returns to examine the time-varying interest rate sensitivity of banks (Verma and Jackson 2008). Scott and Peterson (1986) conducted a study in order to examine the changes in interest rates and found out that they have different effects of stock returns and equity values on either hedged or un-hedged financial institutions. They also found out that the stock returns of financial institutions that do not use hedging techniques have a greater sensitivity to changes in interest rates than those that use these techniques. This quality enabled the un-hedged financial institutions, to balance the maturities of both their assets and liabilities and therefore; not get much affected by the fluctuations of interest rates. Mitchell (1989) argued that banks can control their interest rate risk by matching the interest sensitivity asset and liability . Kwan (1991) developed and tested a random two-factor model. His study provided evidence for the sensitivity of bank stock returns that were positively related to the maturity mismatch between the banks assets and liabilities. The equilibrium price for bearing interest rate risk is also found to vary over time in tandem with the interest rate volatility (Elyasiani and Mansur 1995). Several studies differentiated between long-term and short-term interest rates, concluded that long-term interest rates have more impact on bank stock returns than short term interest rates (Akella and Chen 1990; Mansur and Elyasiani 1995). Flannery et al. (1997) analysed and found out that the market risk and interest rate risk are priced factors of securities. Foreign Exchange Rate There have been very few studies carried out, that examine the effects of foreign exchange( FX) rate risk on the stock returns of financial institutions compared to the interest rate risks. On the international side; the advent of the flexible exchange rate system in the 1970s and the growing internationalization of the economy, including the banking sector, has introduced another macro financial variable, the exchange rate, as a potential determinant of bank stock returns. (Choi et al.1991). Euromoney (Sept. 1995) has also reported that the foreign exchange market has undergone significant structural changes over the past years. The exchange rate fluctuations that are much larger and tend to persist longer than assumed,the inability of central banks to defend or stabilize their currencies through intervention, the declining role of fundamental factors in explaining the behavior of the market, the steady growth in the use of foreign currency derivatives, the growing size of the market because of rapid globalization, and the increasing use of automated trading and real-time information have all been believed to have, but the least, contributed to the increase in the volatility of the market. Exchange rates most directly affect the banks with foreign currency transactions and foreign operations. Even without such activities, exchange rates can affect banks indirectly through their influence on the extent of foreign competition, the demand for loans, and other aspects of banking conditions. (Chamberlain, Howe and Popper,1997). The area in relation to foreign exchange rate exposures is somewhat under researched when compared to the interest rate exposure and it has been found out that the studies for exchange rate exposures provide a mixture of results and inconsistent conclusions. Adler and Dumas (1984) were the first to measure exchange rate exposure as the coefficient of a linear regression of stock returns on exchange rates. Adler and Dumas (1984) sh ow that even firms whose entire operations are domestic may be affected by exchange rates, if their input and output prices are influenced by currency movements. It is widely believed that changing exchange rates affect the competitiveness of firms engaged in international competition. A falling home currency promotes the competitiveness of firms in home country by allowing them to undercut prices charged for goods manufactured abroad (Luehrman,1991). Jorion (1990) carried out a study in order to analyse the FX rate exposure of multinationals in the US. The results observed that there was little evidence to claim a strong relationship exists between the stock returns of a firm and the variances of exchange rates. According to the studies of Bodnar and Gentry (1993), it has been found that there is little correlation between the value of a firm and the fluctuations in FX rates, and that the level of foreign involvement and the characteristics of the industry, do have an effect on this relationship, which is said to be positive. Financial institutions that hold assets and liabilities in different foreign currencies, is suggested by the economic theory to have an influence from the variation on FX rates. Chamberlain et al (1997) researched the FX rate sensitivity of US financial institutions and of Japanese banks, using daily and monthly data in the study. They concluded that there was quite a number of US financial institutions that are sensitive to changes in the exchange rates compared to the Japanese banks. Although the studies carried out has failed to provide a supporting reason as to why there are differences in FX rate levels of the two countries, it has been claimed that the variance may be because of the economic factors. 2.7 Interest Rate and Foreign Exchange Rate Sensitivity Choi et al (1992) extended the above existing models to include exchange rate risks and to assess the interest rate and exchange rate sensitivities in the pre- and post-1979 periods. As studies show, interest rates were stronger before 1979 while exchange rate sensitivity occurred only significantly for money centre banks i.e. after 1979. In addition, these authors also found out that the market factor volatility varied significantly through time and its variation was priced into the expected returns of different securities (Elysiani and Mansur 1998). Since the internationalisation of many financial and banking markets is still incomplete it is likely that both the interest rate and exchange rate sensitivity would vary among financial institutions and the extend to that variation would depend on both the nationality and financial operations of these institutions (Joseph and Vezos 2006). The risks involved thus; will only occur whenever the banks assets and liabilities are mismat ched and the interest rate and foreign exchange rate change unexpectedly (Joseph and Vezos 2006). Saunders and Yourougou (1990) contrasted by arguing that the effect of interest rate changes on bank and non-bank firms during periods of relative interest rate stability (pre-October 1979) and high interest rate volatility (post-October 1979) varied. They reported that the interest rate effects varied substantially over time (Bartram and Bodnar 2007). Yourougou (1990) also specifically found out that, during the period of relative interest rate stability; the interest rate sensitivity was low and insignificant for both banks and non-banking firms, while in the post-October 1979 period; interest rate risk exerted a significant impact on common stocks of financial intermediaries, but not the industrial firms. This in turn suggested for an exchange rate index to be included in the already developed model of bank stock returns (Joseph and Vezos 2006). Wetmore and Brick, 1994 later ex perimented with a three-index model. They found that a structural shift occurred in some of the coefficients of all banks. Another shift occurred in the market risk coefficient for all banks. Their findings showed that the market, interest rate and foreign exchange rate indices were still unstable, making estimates of risk differ by bank type and period; because, as foreign exchange risk declines, interest rate risk also increases. They similarly found out that the exchange rate risk is positively related to the foreign or LDC loan exposure and negatively to off- balance sheet exposure. Financial institutions can hedge to mitigate some of these risks mentioned above, but the hedging done tends to be sometimes partial or incomplete (Grammatikos et al., 1986). Choi and Elyasiani (1997) conducted a study in which they concentrated on the sensitivity of bank returns to interest rate and the FX rate exposures via an off- balance sheet contract. From their study, they found that the finan cial institutions were less exposed to interest rate variations than FX rate variations, which was similar to the previous studies conducted by other authors. They also found that for both the interest rate and FX rate exposures, the betas differ over time as well as across banks. In contrast, a number of empirical studies have been done on the financial institutions stock sensitivity, though the earlier studies were based more on the interest rate changes (Stone, (1974); Lynge and Zumwalt (1980); Kwan (1991)). According to Flannery and James, 1984 the empirical results tended to show strong evidence of interest rate sensitivity (Akalla and Chen (1990). Choi et al (1992) examined the exchange rate exposure of banks and found the evidence of foreign exchange exposure, when they aggregate bank returns. However, their aggregation precludes them from linking the estimated exchange rate exposure to individual firm characteristics (Chamberlain et al, 1997). It would thus not be inap propriate to surmise that bank stock returns are interest rate sensitive, the direction of the effect is negative, and the magnitude of interest rate sensitivity is portfolio-specific and model-dependent. In particular, bank stock return sensitivities are found to be stronger for the long term interest rate than the short-term interest rate and the volatilities of the short-term interest rate and the long term interest rate are found to play an important role in determining bank equity returns and return volatility (Elyasiani and Mansur 2004). The previous studies have found the effect of both interest rate and FX rate changes on financial institutions stock returns; typically employing the standard OLS methods, although some employed the ARCH/GARCH- type estimation methods to control the ARCH effects (Nwogugu 2005). Conclusion It has thus been found, that the effects of both interest rate and FX rate risks are being measured together, even though the studies do not have any consistent results. Although vast majority of studies carried out do support the hypothesis of a relationship existing between stock returns of financial institutions and interest rate and FX rate risks, the level of its importance and the extent of this relationship are still widely discussed. This dissertation will try to overcome the limitations of the previous studies. Many researchers have carried various studies on the effect of both the interest rate and foreign exchange rate changes on the stock returns of financial institutions, the previous studies found out the effect of both the interest rate and FX rate changes on financial institutions stock returns; typically employing the standard OLS methods, although some others employ ARCH/GARCH- type estimation methods to control the ARCH effects. The studies carried out, that e xamined the effects of both factors have in large supported the claims that when measuring the effects of both factors, it should be done mainly using a single model. The OLS estimation method has sometimes generated inefficient estimates due to the volatility clustering and the ARCH effects in the empirical data (see, Baillie and Bollerslev, 1989). ARCH/GARCH-type models are generally found to be better than the standard OLS regression method. Thus for this dissertation we will be using the GARCH model for the various estimations. The GARCH model was preferred over the ARCH models because, according to Brooks (2002), the former is more of a complete model and thereby avoids over fitting, as the current conditional variance can be influenced by an infinite number of past squared errors. In addition, the GARCH-type models are less likely to breach non-negativity constrains and are more appropriate for the type of data and estimations in this research compared to traditional linear regression. Thus for the purpose of this dissertation the GJR-GARCH model will be used for the estimations. Another limitation that has been seen, is that most of the research that has been previously carried out, used monthly and weekly data, which might have been a casual factor for the results of these studies, not being able to fully capture all the movements that occured in indexes of the interest rate , FX rate and stock return. In this study, daily data will be used, as it can be argued that it is more representative of the fluctuations that occur on a daily basis, and thus will enable us to identify an accurate relationship between the three factors.