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Hedging quantitative easing

Lookup NU author(s): Dr Xiaojing SongORCiD

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This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).

Abstract

Arguably the greatest concern surrounding quantitative easing is its potential for expanding the money supply at a rate which outstrips the rate of growth in national output. This will almost surely lead to greater uncertainty in inflationary expectations and this, in turn, can have adverse consequences for stock prices. Our analysis employs the hedging procedures which underscore the Fundamental Theorem of Asset Pricing in conjunction with stochastic processes for stock prices and the money supply to design hedging strategies against potential downside movements in stock prices caused by the uncertainty in inflationary expectations associated with rapid monetary growth.

Publication metadata

Author(s): Melia A, Song X, Tippett M, van der Burg J

Publication type: Article

Publication status: Published

Journal: The European Journal of Finance

Year: 2024

Volume: 30

Issue: 3

Pages: 323-338

Online publication date: 27/07/2023

Acceptance date: 05/06/2023

Date deposited: 12/10/2023

ISSN (print): 1351-847X

ISSN (electronic): 1466-4364

Publisher: Taylor and Francis

URL: https://doi.org/10.1080/1351847X.2023.2224832

DOI: 10.1080/1351847X.2023.2224832

ePrints DOI: 10.57711/pqaw-7e53

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