The effects of quantitative easing on the integration of UK capital markets

We examine the effects of quantitative easing (QE) on the volatility of and correlation between stocks, short-term bonds and long-term bonds in the UK. Using a multivariate dynamic conditional correlation generalised autoregressive conditional heteroscedasticity model, we find that volatility in eac...

Full description

Saved in:
Bibliographic Details
Published in:The European journal of finance 2017-09, Vol.23 (11), p.999-1024
Main Author: Steeley, James M.
Format: Article
Language:English
Subjects:
Capital markets
dynamic correlation
Economic crisis
Economic models
gilts
integration
Monetary policy
quantitative easing
Regression analysis
Short term
UK bonds
UK stocks
Variability
Volatility
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We examine the effects of quantitative easing (QE) on the volatility of and correlation between stocks, short-term bonds and long-term bonds in the UK. Using a multivariate dynamic conditional correlation generalised autoregressive conditional heteroscedasticity model, we find that volatility in each of the markets experiences a significant increase during the financial crisis that is reversed during the first phase of QE. We find limited effects of the specific occurrence or intensity of QE activity on either the volatility or correlations for these asset classes, but some evidence that volatility persistence experienced temporary shifts during the sample period. We find short-term variability in the correlations between the markets during the crisis and QE periods, but cannot reject the hypothesis that correlations were constant throughout the sample period.
ISSN:1351-847X
1466-4364
DOI:10.1080/1351847X.2015.1067635