The relation between quantitative easing and bubbles in stock markets
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2016-08-25
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en
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"This thesis examines the relation between quantitative easing (QE) and bubbles in stock markets. Among economists, concerns exist whether QE leads to bubbles in asset markets. Due to low interest rates, investors start looking for higher returns. In this quest for even higher returns, risk premiums reduce and asset prices increase, with the risk of bubbles. Until now, no specific research has been conducted that considers the effect(s) of QE on stock market bubbles. This thesis aims to fill this knowledge gap in the literature. In existing literature, a distinction is made between speculative bubbles and intrinsic bubbles. The presence of both types of bubbles caused by QE is investigated in the four major markets where central banks applied QE, namely the United States, the Eurozone, the United Kingdom and Japan. Based on these tests, in general there is no major indication that QE leads to bubbles in stock markets. There is only a small indication in the Eurozone during the period 2010-2016."
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Faculteit der Managementwetenschappen