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The Portfolio Rebalance Effect: Measuring the effects of QE on stock returns
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation.
2015 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This thesis has identified a gap in literature regarding the effects of quantitative easing (QE) on equities since the financial crisis in 2008. An event study has been conducted to investigate the portfolio rebalance effect stating that assets not regarded as close substitutes to targeted assets under the QE-scheme, e.g. equities, should respond with a lag to new information regarding QE. Also literature suggests that larger stocks should tend to lead smaller stocks. Assuming investors regard larger stocks as safer we aim to test the hypotheses that stocks will respond to QEannouncements containing new, unanticipated information and that larger, safer stocks will lead smaller, more volatile. The responses in the U.S. stock indices S&P 500, its corresponding sectors as well as mid and small cap indices are examined on nine identified events. Results show that stocks respond immediately on the day of a QE-announcement, but also that returns continue to increase the following days after. Also smaller, more volatile stocks have larger average abnormal returns compare to larger, less volatile stocks.

Place, publisher, year, edition, pages
2015. , 36 p.
Keyword [en]
Quantitative easing, equity, event study, financial crisis, portfolio rebalance effect
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:kth:diva-189231OAI: oai:DiVA.org:kth-189231DiVA: diva2:944593
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Available from: 2016-06-30 Created: 2016-06-29 Last updated: 2016-09-02Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
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