A Rising Tide Lifts Some (Japanese) Boats: The Bank of Japan's ETF Purchases and Their Impact on Market Signals for Individual Stocks

29 Pages Posted: 15 Mar 2021

See all articles by Steven Shen

Steven Shen

Informa Financial Intelligence, EPFR

Sayad Baronyan

Informa Financial Intelligence, EPFR

Vikram Srimurthy

affiliation not provided to SSRN

Cameron Brandt

affiliation not provided to SSRN

Date Written: March 13, 2021

Abstract

Unlike the government securities purchases of central banks, purchases of private securities can have disproportionate effects. These effects might create additional buying pressure on some securities, which could be the source of an additional premium. Therefore, we explore whether the ETF buying program of Bank of Japan has created an additional price pressure on Japanese stocks. We create portfolios that use BOJ eligible ETF holdings as a weighting variable and show that stocks with higher BOJ holdings have created higher returns. We also show that these returns are positive even after controlling for the classical equity risk factors.

Keywords: Central Banks,Quantitative Easing, Stock Selection, ETF

Suggested Citation

Shen, Steven and Baronyan, Sayad and Srimurthy, Vikram and Brandt, Cameron, A Rising Tide Lifts Some (Japanese) Boats: The Bank of Japan's ETF Purchases and Their Impact on Market Signals for Individual Stocks (March 13, 2021). Available at SSRN: https://ssrn.com/abstract=3803864 or http://dx.doi.org/10.2139/ssrn.3803864

Steven Shen

Informa Financial Intelligence, EPFR ( email )

United Kingdom

Sayad Baronyan (Contact Author)

Informa Financial Intelligence, EPFR ( email )

5 Howick Place
Westminster
London, SW1P 1WG
United Kingdom

Vikram Srimurthy

affiliation not provided to SSRN

Cameron Brandt

affiliation not provided to SSRN

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