The Impact of Quantitative Easing on Stock Market: Evidence from Greece

Abstract

AbstractIn September of 2014, ECB decides the beginning of the first Quantitative Easing (QE) programme called Asset-Backed Securities Purchase (ABSPP) and Covered Bond Purchase Programme (CBPP), in order to face the financial crisis. Next programme was the Public Sector Purchase Programme (PSPP) on 9 March 2015. Finally, on 18 March 2020, the ECB started the third programme called Pandemic Emergency Purchase Programme (PEPP). The goal of this study is to explore the impact of QE programmes on the stock market of Athens, considering the fact that Greece was the only European country to participate only in the third programme. Using daily data from 1/9/2014 to 22/1/2021, 3 GARCH(1,1) models with dummy variables are constructed to incorporate different QE programmes. In addition, 10-year bond, gold, and DAX are used in order to isolate systematic international factors. The empirical results show that the first QE programme has decreased the stock prices, the findings of the second QE programme aren’t statistically important, while the third programme has a positive effect on the stock market. The paper concludes that Greek participation on the QE programme played an important role in the stock market and suggests that other researchers investigate the methods in which Greece can utilize the positive climate after the end of PEPP.KeywordsECB quantitative easingStock marketGreeceGARCHJel Classification CodesC22E44E52E58