Randall Morck, Alberta School of Business

"Asset Prices, Corporate Actions, and Bank of Japan Equity"

Since 2010, the Bank of Japan (BOJ) has purchased stocks to boost domestic firms’ valuations to increase GDP growth. The stock return elasticity with respect to BOJ purchases relative to the previous month’s market capitalization is around 1.6 on the day of the purchase and decreases across longer horizons. Over a quarter, BOJ share purchases worth 1% of total assets correspond to an increase of 1% in returns and a 0.27% increase in total assets. BOJ share purchases predict equity issuances but not debt issuances. However, this largely reflects increased cash and short-term investments. This unconventional monetary stimulus thus may boost share prices and encourages equity issuances, but is ultimately not well transmitted into real tangible capital investment.


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Contact person: Casper Worm Hansen