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The effects of quantitative easing on the volatility of the gilt-edged market

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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.

Citation

(2014). The effects of quantitative easing on the volatility of the gilt-edged market. International Review of Financial Analysis, 113 - 128. https://doi.org/10.1016/j.irfa.2014.11.004

Acceptance Date Nov 1, 2014
Publication Date Nov 20, 2014
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Pages 113 - 128
DOI https://doi.org/10.1016/j.irfa.2014.11.004
Keywords Quantitative easing; GiltsUK; bonds; Volatility; Bond investors
Publisher URL https://doi.org/10.1016/j.irfa.2014.11.004

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