Bank of Japan's ETF purchase program and equity risk premium: a CAPM interpretation

Mitsuru Katagiri, Koji Takahashi and Junnosuke Shino

No 1029, BIS Working Papers from Bank for International Settlements

Abstract: In this paper, we investigate the effects of the Bank of Japan's (BOJ) exchange-traded fund (ETF) purchase program on equity risk premia. We first construct a unique panel dataset for the amount of individual stock that the BOJ has indirectly purchased in the program. Then, utilizing the cross-sectional and time-series variations in purchases associated with the BOJ's policy changes, the empirical analysis reveals that: (i) the BOJ's ETF purchases instantaneously support stock prices on the days of purchases, and (ii) the instantaneous positive effects on stock prices, combined with the countercyclical nature of the BOJ's purchases, have decreased the market beta and coskewness of Japanese stocks, thus leading to an economically significant decline in risk premia.

Keywords: large-scale asset purchases (LSAP); ETF purchase program; capital asset pricing model (CAPM); Bank of Japan (search for similar items in EconPapers)
JEL-codes: E58 G12 G14 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.bis.org/publ/work1029.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work1029.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1029

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().