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JOURNAL OF INTERDISCIPLINARY RESEARCH

Stoxx600 +0.02%). We put this into context with market
expectations, and again, understanding of reaction function.
Several studies approached more sophisticated methods to
identify only announcements considered as an unconventional
monetary policy “surprises”, in order to examine only
movements and reactions on such days (see e.g. Hutchinson and
Smets, 2017). Hence, there are some announcements that need
individual approach. On 2

December 2012, the OMT

programme was announced, which was followed by initial
negative reactions, however for next three days were
significantly positive from indices examined perspective. We
argue this is in line with portfolio rebalancing channel, same as
the situation on 8

August 2011 after reactivation of SMP

(announced on Sunday, 7

August 2011), when the Spanish and

Italian sovereign bond markets came under tension, and
investors rebalanced their portfolios towards the programme
linked assets. Another announcement that caused significant
portfolio rebalancing, was made on 7

May 2009, when CBPP1

was announced, therefore we faced sell-offs in equities. Besides
these announcements, followed by significant sell-offs in
equities, we identified, that even initial reactions on some
announcement days

were negative, further trading days brought

significant positive returns. Consequently, we separated excess
returns on announcement days containing information about
announcing, expanding or prolonging the QE (25 announcement
days, 13 for Stoxx600, respectively

Tab. 6: Excess returns on announcing, expanding or prolonging
the QE

Date

CAC

DAX

Eurostoxx50

FTSEMIB

Stoxx600

14.06.2018

1.33%

3.28%

1.34%

1.26%

1.86%

26.10.2017

1.41%

1.28%

1.21%

1.54%

1.03%

15.12.2016

0.93%

0.98%

1.08%

1.89%

0.82%

08.12.2016

0.75%

1.66%

1.28%

1.49%

1.18%

10.03.2016

-1.64%

-2.19%

-1.39%

-0.26%

-1.56%

09.11.2015

-1.49%

-1.58%

-1.44%

-1.84%

-1.06%

23.09.2015

0.21%

0.65%

0.29%

0.26%

0.23%

22.01.2015

1.37%

1.08%

1.47%

2.37%

1.50%

30.10.2014

0.74%

0.35%

0.42%

0.15%

0.56%

02.10.2014

-2.80%

-1.89%

-2.76%

-3.91%

-2.39%

18.09.2014

0.78%

1.47%

1.07%

0.12%

0.99%

03.07.2014

1.03%

1.15%

1.14%

0.98%

0.90%

04.06.2014

1.01%

0.11%

0.82%

1.43%

0.36%

06.12.2012

0.27%

1.04%

0.40%

-0.71%

31.10.2012

-0.83%

-0.36%

-0.49%

0.08%

06.09.2012

2.87%

2.70%

3.19%

4.03%

26.07.2012

4.13%

2.82%

4.35%

5.82%

08.12.2011

-2.63%

-2.18%

-2.60%

-4.44%

06.10.2011

3.71%

3.51%

3.46%

3.87%

30.06.2010

0.64%

0.33%

1.01%

0.83%

10.05.2010

9.69%

5.18%

10.40%

11.41%

15.10.2008

-1.08%

-1.68%

-1.37%

-1.63%

13.10.2008

-6.48%

-6.07%

-6.12%

-4.95%

08.10.2008

11.51%

11.82%

11.36%

11.88%

28.03.2008

-6.16%

-5.64%

-6.26%

-5.46%

Average

0.77%

0.71%

0.87%

1.05%

0.34%

NoPR

PosRatio

68%

77%

Note: NoPR – Number of Positive Returns; PosRatio – Ratio of
positive returns.
Source: Own elaboration.

Tab. 6 indicates that each index remained in positive range in
average, while in 68% of observed announcement days CAC,
DAX, Eurostoxx50 and FTSEMIB returned positively, Stoxx600
in 77% of observed announcement days, respectively.
Considering now only period starting in January 2015, we
present similar table (Tab. 7) with group of announcing,
prolonging or expanding the QE programmes linked
information:

Tab. 7: Excess returns on announcing, expanding or prolonging
(2015 onwards)

Date

CAC

DAX

Eurostoxx50

FTSEMIB

Stoxx600

14.06.2018

1.33%

3.28%

1.34%

1.26%

1.86%

26.10.2017

1.41%

1.28%

1.21%

1.54%

1.03%

15.12.2016

0.93%

0.98%

1.08%

1.89%

0.82%

March 2016, 30

October 2014, 31

October 2012, 2

August 2012, 8

December 2011.

Announcements described individually above, that caused significant portfolio

rebalancing and therefore sell-offs in equities, we consider as unprecedented, hence
we do not add them to Group 1 announcements.

08.12.2016

0.75%

1.66%

1.28%

1.49%

1.18%

10.03.2016

-1.64%

-2.19%

-1.39%

-0.26%

-1.56%

09.11.2015

-1.49%

-1.58%

-1.44%

-1.84%

-1.06%

23.09.2015

0.21%

0.65%

0.29%

0.26%

0.23%

22.01.2015

1.37%

1.08%

1.47%

2.37%

1.50%

Average

0.36%

0.65%

0.48%

0.84%

0.50%

NoPR

PosRatio

75%

Note: NoPR – Number of Positive Returns; PosRatio – Ratio of
positive returns.
Source: Own elaboration.

From Tab. 7 we see, that in 75% of observed announcement
days, each index remained in positive range. We add on, that
both announcements

when we faced negative reactions, were

followed by at least two consequent days of significant gains in
each index. Again, we explain it as a rebalancing towards other,
programme-linked, assets. Results from January 2015 onwards
are again in line with theory that that the equity indices tend to
react positively on announcing, prolonging or expanding the QE
programmes linked information. We find similar results in study
examining equities in the United States regarding the QE of the
FED (Safar and Sinicakova, 2019). Still literature coverage of
examining equities reaction to the ECB’s QE is scarce in
general, therefore possibility to put our results in comparison
with other authors is rather limited. On the other hand, original
assumption is partially in line with Henseler and Rapp (2018),
who suggests that positive reactions to the QE follow only
regarding leveraged companies, however we examined not only
non-financial companies as the authors did. Our results support
conclusion of Shah et al. (2018), that the role of QE in
explaining excess returns is important in the short-run. On the
other hand, having only two announcements linked to tapering,
quitting the QE or policy normalizing, we cannot verify
assumption, that indices tend to react negatively to such type of
information.

Individual analysis of specific announcements, and reactions that
followed brought us to the conclusion, that after the
announcement containing initial information about a new
programme, we can expect sell-off in equities, which is caused
by rebalancing the portfolios towards assets directly linked to the
programme being announced, or similar assets. Strong effects
found in the EU regarding programme initiation announcements
we consider in line with Henseler and Rapp (2018). This, even
from the short-term perspective, supports the portfolio
rebalancing channel, broadly discussed and examined in
literature from long-term perspective (see e.g. Hausken and
Ncube, 2013; Krishnamurthy and Vissing-Jorgensen, 2011;
Joyce et al., 2011; Gertler and Karadi, 2011).

Additionally, we observe decreasing volatility of reactions (see
e.g. Ghosh and Saggar, 2017; Xing, 2018), especially after the
“whatever it takes” speech by Mario Draghi in 2012. Strong
commitment from the ECB depressed the volatility, and
improved communiqué helped market participants to understand
the ECB’s reaction function more accurately. Concluding such
necessity of the reaction function communiqué, we find also in
Hutchinson and Frank (2017). The signalling channel, we
consider as very important both from long-term perspective
(Hausken and Ncube, 2013; Bhattarai et al., 2015, Bernanke et
al., 2004; Eggertsson and Woodford, 2003) and short-term
perspective – if we take into account the market participants’
expectations, that the short-term interest rates (yields
respectively) will remain low in the future (based on the forward
guidance), we can observe bidding down yields on long-term
securities, and also pushing up equity prices (mainly because of
future earnings expectations). However, regarding tapering, or
policy normalization linked information, we get mixed results,
and we have only two such announcements yet, therefore we
cannot provide significant results. Mixed equity index reactions
we put in context of, inter alia, combination of well reaction
function understanding on the one hand, and unprecedent
character of such move on the other.

On 9

November 2015 PSPP share limit per ISIN was increased, and on 10

March

2016 TLTROII was announced.

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