Template-Type: ReDIF-Paper 1.0
Author-Name: Mitsuru Katagiri
Author-X-Name-First: Mitsuru
Author-X-Name-Last: Katagiri
Author-Name: Koji Takahashi
Author-X-Name-First: Koji
Author-X-Name-Last: Takahashi
Author-Name: Junnosuke Shino
Author-X-Name-First: Junnosuke
Author-X-Name-Last: Shino
Title: Bank of Japan's ETF purchase program and equity risk premium: a CAPM interpretation
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.
Length: 43 pages
Creation-Date: 2022-07
File-URL: https://www.bis.org/publ/work1029.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1029.htm
File-Format: text/html
Number: 1029
Keywords: large-scale asset purchases (LSAP), ETF purchase program, capital asset pricing model (CAPM), Bank of Japan
Classification-JEL: E58, G12, G14
Handle: RePEc:bis:biswps:1029