Abstract
This study extends the previous empirical research into the sensitibity of equity prices to include interest rates. Specifically, the null hypothesis that the interest rate sensitivity of equity prices is independent of the level of systematic risk and financial leverage is tested. The hypothesis is tested using a short-term and long-term interest rate index. The results show that the interest rate sensitivity of equity prices is independent of the amount of financial leverage but not independent of the level of systematic risk.
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