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Title: Quantitative easing (QE) and investing in financial asset markets
Author: Shogbuyi, Abiodun
ISNI:       0000 0004 7426 0323
Awarding Body: Aston University
Current Institution: Aston University
Date of Award: 2017
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This study is an empirical investigation into the effects of the Quantitative easing (QE) operations implemented in the aftermath of the financial crisis of 2008 by the BoE and the Fed on the broader financial markets in the UK and US. It avoids a major pitfall of earlier studies that just focused on the impact of QE on government bond yields. Considering the channels of the QE policy, it assesses the effects of QE operations on bond yields and equity market returns in the US and UK using an event study before using a GARCH specification augmented with QE intensity and period variables to model the returns and volatility dynamics for the US and UK equity markets primarily, as well as others that did not implement the QE policy at the time. It also examines the effects of QE on the covariance between the inter-financial (i.e. the UK and US equity markets) and intra-financial (i.e. the equity and bond markets in the UK and US) using the DVECH model. An investigation of the long-run relationship of the US, the UK, France and Germany equity markets, following the QE operations using the multivariate cointegration and VECM techniques is made. We report significant effects on equity and bond market yields following the QE announcements and the actual bond purchases. Though there is evidence of increased (positive) co-variance between the UK and US equity markets following the actual QE purchases, this appeared to have been induced by the BoE and not the Fed QE operations. Conversely, the intra-financial markets analyses of the effect of QE on the covariance between the equity and bond markets in the UK and US respectively revealed significant (negative) covariance between the bond and equity markets following the QE operations. No evidence is found of an increasing convergence amongst the US and the UK equity markets, following the QE actions. As the toolkit of monetary policy in the aftermath of the recent financial crisis has been expanded to now include a hitherto unconventional tool in the mode of QE, the findings of this study provide the monetary authorities with an understanding of the broader financial market especially the equity market reaction function to the QE policy and thereby fills this gap in the literature. This thesis adds to several existing literatures on equity market volatility, equity-bond market covariation and equity market cointegration from a QE perspective, as well as adding to a growing body of literature that has examined the broader effects of QE.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral