The Leibniz Institute SAFE and the Finance department organize a brown bag seminar on
Does central bank ETFs ownership Boost the Volatility of the underlying assets?
Leonardo Cadamuro (Luiss)
Abstract: This paper analyses how the Japanese Exchange Traded Fund (ETF) market size boosts the volatility of the underlying assets. Similar to the U.S. case, Japanese ETFs magnify the volatility of underlying assets transmitting exogenous shocks through the rebalancing process. However, Japan represents the only developed country where central bank purchases dominate the ETF market; moreover, the Bank of Japan’s countercyclical policy mitigates the impact of ETFs on the volatility of underlying asset prices. Furthermore, the Bank of Japan protects the market from negative shocks, although it tends not to intervene in the case of positive shocks, thereby generating a biased mitigation effect.
