QUANTITATIVE EASING EFFECTS ON REAL ESTATE COMPANIES IN EUROZONE COUNTRIES BY GARCH APPROACH

Abstract

Since the global financial crisis (GFC) in 2008, quantitative easing (QE) has become a new norm for central banks to rescue the economy. Many research studies have covered the QE done in U.S and Japan. One area that is less researched is the Eurozone. This paper aims to assess the influence of the past three rounds of European Central Bank (ECB)’s monetary policy on the stock market of public real estates firms within the euro area. The study employs generalized autoregressive conditional heteroskedasticity (GARCH) approach developed by Bollerslev (1968) over a period of 8 years from 2007 to 2014, covering both the GFC and the ongoing Eurozone Debt Crisis. A total of 64 real estate companies covering six Eurozone countries are examined against the three rounds of QE policies implemented by ECB across varied sub-periods. The empirical results appear to provide some evidence that the public real estate companies have reacted to QE carried out by ECB in their returns as well as their volatility. Moreover, the QE actions seem have a stronger relationship with the volatility of these real estate stocks than the returns. The overall outcome support the assumption that QE policies do have effects on the real estate capital markets.