NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Asset Prices, Corporate Actions, and Bank of Japan Equity Purchases

Ben Charoenwong, Randall Morck, Yupana Wiwattanakantang

NBER Working Paper No. 25525
Issued in February 2019, Revised in August 2019
NBER Program(s):Corporate Finance Program

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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Document Object Identifier (DOI): 10.3386/w25525

 
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