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Bank of Japan’s ETF purchase program and equity risk premium: A CAPM interpretation

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  • Katagiri, Mitsuru
  • Shino, Junnosuke
  • Takahashi, Koji

Abstract

We investigate the effects of the Bank of Japan’s (BOJ’s) exchange-traded fund (ETF) purchase program on equity risk premia. Utilizing the cross-sectional variations in the amount of individual stock that the BOJ has indirectly purchased in the program, the empirical analysis reveals that: (i) the BOJ’s ETF purchases instantaneously support stock prices on purchase, and (ii) the positive effects on stock prices, combined with the countercyclical nature of the BOJ’s purchases, affect the market beta and coskewness of Japanese stocks, leading to an economically significant decline in risk premia.

Suggested Citation

  • Katagiri, Mitsuru & Shino, Junnosuke & Takahashi, Koji, 2025. "Bank of Japan’s ETF purchase program and equity risk premium: A CAPM interpretation," Journal of Financial Markets, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finmar:v:73:y:2025:i:c:s1386418125000011
    DOI: 10.1016/j.finmar.2025.100961
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    More about this item

    Keywords

    Large-scale asset purchases (LSAP); ETF purchase program; Capital asset pricing model (CAPM); Bank of Japan;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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