Abstract
We model the effects of quantitative easing on the volatility of returns to individual gilts, examining both the effects of QE overall and of the specific days of asset purchases. The action of QE successfully neutralized the six fold increase in volatility that had been experienced by gilts since the start of the financial crisis. The volatility of longer term bonds reduced more quickly than the volatility of short to medium term bonds. The reversion of the volatility of shorter term bonds to pre-crisis levels was found to be more sensitive to the specific operational actions of QE, particularly where they experienced relatively greater purchase activity.
| Original language | English |
|---|---|
| Pages (from-to) | 113–128 |
| Number of pages | 16 |
| Journal | International Review of Financial Analysis |
| Volume | 37 |
| Early online date | 20 Nov 2014 |
| DOIs | |
| Publication status | Published - Jan 2015 |
Bibliographical note
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of international money and finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Steeley, JM & Matyushkin, A, 'The effects of quantitative easing on the volatility of the gilt-edged market' International review of financial analysis, vol. 37 (2015) DOI http://dx.doi.org/10.1016/j.irfa.2014.11.004Keywords
- quantitative easing
- gilts
- UK bonds
- volatility
- bond investors