The impact of monetary policy shocks on the equity risk premium before and after the quantitative easing in the United Kingdom

Poshakwale, Sunil and Chandorkar, Pankaj (2016) The impact of monetary policy shocks on the equity risk premium before and after the quantitative easing in the United Kingdom. Investment Management and Financial Innovations, 13 (4). pp. 146-159. ISSN 1810-4967

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Official URL: http://dx.doi.org/10.21511/imfi.13(4-1).2016.01

Abstract

The authors investigate the impact of structural monetary policy shocks on ex-post equity risk premium (ERP) of aggregate and sectoral FTSE indices and 25 Fama-French style value-weighted portfolios. They find that monetary policy shocks negatively affect the ERP but at the sectoral level, the magnitude of the response is heterogeneous. Further, monetary policy shocks have a significant negative (positive) impact on the ERP before (after) the implementation of quantitative easing (QE). The empirical evidence provided in the paper sheds light on the equity market’s asymmetric response to the BoE’s policy before and after the monetary stimulus.

Item Type: Article
Uncontrolled Keywords: monetary policy, equity risk premium, quantitative easing, monetary policy shocks, structural vector autoregression, Bank of England, Taylor monetary policy rule, unconventional monetary policy, output gap, inflation gap, Okun’s law
Subjects: L100 Economics
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
Depositing User: Pankaj Chandorkar
Date Deposited: 25 Sep 2017 08:34
Last Modified: 21 Dec 2017 12:22
URI: http://nrl.northumbria.ac.uk/id/eprint/31956

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