Quantitative easing in the Euro area: the dynamics of risk exposures and the impact on asset prices
Subject
Finance
Publishing details
Social Sciences Research Network
Publication Year
2016
Abstract
We use new data on security-level portfolio holdings of institutional investors and households in the euro area to understand the impact of the ongoing asset purchase programme of the European Central Bank (ECB) on the dynamics of risk exposures and on asset prices. We develop a tractable measurement framework to quantify the dynamics of euro-area duration, sovereign and corporate credit, and equity risk exposures as the programme evolves. We propose an instrumental-variables estimator to identify the impact of central bank purchases on sovereign bonds on sovereign bond yields. Our results suggest that the foreign sector sells most in response to the programme, followed by banks and mutual funds, while the purchases of insurance companies and pension funds are positively related to purchases by the ECB.
Keywords
Quantitative easing; Flow of risk; Portfolio rebalancing; Risk concentration
Series
Social Sciences Research Network
Available on ECCH
No
