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

Sunil Poshakwale, Pankaj Chandorkar

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    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.
    Original languageEnglish
    Pages (from-to)146-159
    JournalInvestment Management and Financial Innovations
    Volume13
    Issue number4
    DOIs
    Publication statusPublished - 16 Dec 2016

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