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

James M. Steeley, Alexander Matyushkin

Research output: Contribution to journalArticle

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.
Original languageEnglish
Pages (from-to)113–128
Number of pages16
JournalInternational Review of Financial Analysis
Volume37
Early online date20 Nov 2014
DOIs
Publication statusPublished - Jan 2015

Bibliographical note

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of international money and finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Steeley, JM & Matyushkin, A, 'The effects of quantitative easing on the volatility of the gilt-edged market' International review of financial analysis, vol. 37 (2015) DOI http://dx.doi.org/10.1016/j.irfa.2014.11.004

Keywords

  • quantitative easing
  • gilts
  • UK bonds
  • volatility
  • bond investors

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