Sector to Sector Quantitative Easing Affects Differently: How the European Central Bank’s Unconventional Monetary Policy Affects Sectors in the Euro Area Differently

Abstract

In this thesis, we examine the effect of the European Central Bank’s (ECB) unconventional monetary policy on sectors in the euro area. To do this, the study employs regression analysis, examining stock price returns for the period around a policy announcement. This is done for 12 announcements be- tween the 22nd of January 2015 and the 9th of September 2021. As the period covers the Covid-19 crisis, this is taken into account explicitly, as well as the general trend is adjusted for. We find that the announcement of unconventional monetary policy by the ECB does not affect sector returns equally - a finding that goes for both positive and negative announcements. This is contrary to earlier studies. It is found that overall the markets do move in the expected direction, depending on the announcement. Furthermore, we find that sensitive sectors like the technology and cyclical sectors like the consumer cyclical sector exhibit the greatest movements around the announcement, whereas sectors like consumer non-cyclical and utilities move less. Finally, it is found that the otherwise cyclical sector, real estate, performs more like the defensive sectors under announcements of unconventional monetary policy. These findings are relevant for investors in determing their strategies and for policy-makers in improving their policy measures.