Expansionary Policy in the 21st Century: Unconventional monetary policy and its effect on equity valuation
(2019) NEKH01 20191Department of Economics
- Abstract
- Over the past two decades several central banks have to varying extent and over different periods used unconventional monetary policy in order to govern stubbornly low inflation rates. As policy rates decrease to near zero or even negative levels for prolonged periods of time, the risk premium on financial markets as well as the cost of debt is altered. This thesis examines how equity valuations on stock market indices are affected by changing policy rates. The analysis consists of panel data regressions on aggregate market data from thirteen national stock market indices during the period 2005-2018. The findings establish a relationship between expansionary monetary policy and increased stock market valuation as measured by the... (More)
- Over the past two decades several central banks have to varying extent and over different periods used unconventional monetary policy in order to govern stubbornly low inflation rates. As policy rates decrease to near zero or even negative levels for prolonged periods of time, the risk premium on financial markets as well as the cost of debt is altered. This thesis examines how equity valuations on stock market indices are affected by changing policy rates. The analysis consists of panel data regressions on aggregate market data from thirteen national stock market indices during the period 2005-2018. The findings establish a relationship between expansionary monetary policy and increased stock market valuation as measured by the price-earnings ratio, but not with regards to measures of market value relative to replacement cost. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8999035
- author
- Göransson, Tim LU and Karsten, Henrik
- supervisor
- organization
- course
- NEKH01 20191
- year
- 2019
- type
- M2 - Bachelor Degree
- subject
- keywords
- Unconventional monetary policy, Equity valuation, Quantitative easing, Stock market index
- language
- English
- id
- 8999035
- date added to LUP
- 2020-02-14 08:41:55
- date last changed
- 2020-02-14 08:41:55
@misc{8999035, abstract = {{Over the past two decades several central banks have to varying extent and over different periods used unconventional monetary policy in order to govern stubbornly low inflation rates. As policy rates decrease to near zero or even negative levels for prolonged periods of time, the risk premium on financial markets as well as the cost of debt is altered. This thesis examines how equity valuations on stock market indices are affected by changing policy rates. The analysis consists of panel data regressions on aggregate market data from thirteen national stock market indices during the period 2005-2018. The findings establish a relationship between expansionary monetary policy and increased stock market valuation as measured by the price-earnings ratio, but not with regards to measures of market value relative to replacement cost.}}, author = {{Göransson, Tim and Karsten, Henrik}}, language = {{eng}}, note = {{Student Paper}}, title = {{Expansionary Policy in the 21st Century: Unconventional monetary policy and its effect on equity valuation}}, year = {{2019}}, }