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

Mitsuru Katagiri et al.

Journal of Financial Markets2025https://doi.org/10.1016/j.finmar.2025.100961article
AJG 3ABDC A*
Weight
0.49

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. • Countercyclical BOJ purchases lower Japanese equity risk premia. • BOJ’s ETF program reduces market beta and coskewness of stocks. • Decline in risk premia significantly boosts Japanese stock prices. • Panel data reveal cross-sectional effects of BOJ’s ETF purchases.

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https://doi.org/https://doi.org/10.1016/j.finmar.2025.100961

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@article{mitsuru2025,
  title        = {{Bank of Japan’s ETF purchase program and equity risk premium: A CAPM interpretation}},
  author       = {Mitsuru Katagiri et al.},
  journal      = {Journal of Financial Markets},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1016/j.finmar.2025.100961},
}

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Evidence weight

0.49

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.44 × 0.4 = 0.18
M · momentum0.60 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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