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The Impact of Federal Reserve Interest Rate Hike on the Entertainment Industry: An Empirical Evidence
- 1 Beijing Normal University-Hong Kong Baptist University United International College
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Abstract
The purpose of this paper is to investigate the impact of Federal Reserve interest rate hikes on the entertainment industry, with a focus on the American film company Disney. The study utilizes a VAR model for impulse response analysis and an ARMA-GARCH model for assessing stock returns and conditional variances. The findings indicate that a rise in the USD index leads to a decrease in Disney's earnings from foreign markets, and a Fed rate hike could have a negative impact on its profitability. However, higher interest rates can encourage funds to flow into the stock market and increase the demand for stocks, leading to a rise in stock prices. Negative effect dominates at the beginning, followed by positive effect, and then changes back to negative effect, gradually net effect tends to 0 over time. The paper suggests that investors diversify their portfolio, and that enterprises develop targeted risk management and seek policy support. The study provides insights into the multifaceted effects of a Fed rate hike on the entertainment industry, and contributes to the existing literature on exchange rate risk and capital structure in multinational corporations.
Keywords
entertainment industry, VAR model, stock return and volatility, Disney
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Cite this article
Lu,K. (2023). The Impact of Federal Reserve Interest Rate Hike on the Entertainment Industry: An Empirical Evidence. Advances in Economics, Management and Political Sciences,45,79-85.
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