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AD ALTA

JOURNAL OF INTERDISCIPLINARY RESEARCH

4 Results and discussion

In Tab. 3 we present calculated excess returns for main indices
of Germany (DAX), France (CAC), Italy (FTSEMIB),
Eurostoxx50 and Stoxx600 on ECB announcement days
presented in Tab. 2. We point out, that in Tab. 3 are excess
returns calculated both for the UMP programmes before the QE
started same as for the announcements regarding the QE after
January 2015.

From these results, we would like to point out several remarks.
Firstly, if we are considering “index movements” above or
below one standard deviation of performance over reference
period as a strong magnitude reaction, we can conclude, that in
period before the QE (started by announcement on 22.01.2015)
market reactions were more volatile than in period after the QE
started. We put this conclusion in the context of decreasing
volatility in the markets all over the world after crisis.

With respect to reactions in late 2018 and, in general, hard and
soft data revised down across the globe along with other
geopolitical tensions drove also sentiment among the European
equity markets. Especially indicators such as inflation
expectations and growth expectations were revised down (by the
OECD, the ECB or the IMF), and beaten more than expected in
several EU countries, which put some pressure on the ECB and
its projected policy, especially with regards to future rates-hiking
path and the policy normalization. However, for the ECB, we
did not record any significant policy change-related
announcement in particular timeframe. Further in Tab. 4 we
provide some descriptive overview of calculated excess returns.
Average reactions over the whole reference period (2008-
2019Q1) are in slightly positive range, although we do not
consider it as a significant information linked only to the QE.

Tab. 3: Excess returns on the ECB’s announcements

Date

CAC

DAX

Eurostoxx50

FTSEMIB

Stoxx600

13.12.2018

-0.10%

1.77%

0.26%

0.72%

0.02%

14.06.2018

1.33%

3.28%

1.34%

1.26%

1.86%

25.01.2018

-0.26%

-0.89%

-0.36%

0.34%

-0.40%

26.10.2017

1.41%

1.28%

1.21%

1.54%

1.03%

15.12.2016

0.93%

0.98%

1.08%

1.89%

0.82%

08.12.2016

0.75%

1.66%

1.28%

1.49%

1.18%

10.03.2016

-1.64%

-2.19%

-1.39%

-0.26%

-1.56%

09.11.2015

-1.49%

-1.58%

-1.44%

-1.84%

-1.06%

23.09.2015

0.21%

0.65%

0.29%

0.26%

0.23%

22.01.2015

1.37%

1.08%

1.47%

2.37%

1.50%

30.10.2014

0.74%

0.35%

0.42%

0.15%

0.56%

02.10.2014

-2.80%

-1.89%

-2.76%

-3.91%

-2.39%

18.09.2014

0.78%

1.47%

1.07%

0.12%

0.99%

03.07.2014

1.03%

1.15%

1.14%

0.98%

0.90%

04.06.2014

1.01%

0.11%

0.82%

1.43%

0.36%

06.12.2012

0.27%

1.04%

0.40%

-0.71%

31.10.2012

-0.83%

-0.36%

-0.49%

0.08%

06.09.2012

2.87%

2.70%

3.19%

4.03%

02.08.2012

-2.73%

-2.23%

-2.70%

-4.59%

26.07.2012

4.13%

2.82%

4.35%

5.82%

08.12.2011

-2.63%

-2.18%

-2.60%

-4.44%

06.10.2011

3.71%

3.51%

3.46%

3.87%

07.08.2011

-4.35%

-4.74%

-3.40%

-2.14%

30.06.2010

0.64%

0.33%

1.01%

0.83%

10.05.2010

9.69%

5.18%

10.40%

11.41%

07.05.2009

-4.58%

-3.39%

-4.23%

-3.17%

15.10.2008

-1.08%

-1.68%

-1.37%

-1.63%

13.10.2008

-6.48%

-6.07%

-6.12%

-4.95%

08.10.2008

11.51%

11.82%

11.36%

11.88%

28.03.2008

-6.16%

-5.64%

-6.26%

-5.46%

Note: Bold labelled are excess returns above standard deviation
of daily returns, excess returns below standard deviation of daily
returns are shown in italics. Stoxx600 data set is available only
from 2013 onwards.
Source: Own elaboration. Daily data from 2008Q1 to 2019Q1
retrieved from Investing.com.

Considering now only period from 2015 onwards (Tab. 5), we
face again slightly positive reactions on every index in average:
CAC +0.25%, DAX +0.60%, Eurostoxx50 +0.37%, FTSEMIB
+0.78% and Stoxx600 +0.36%, which is well above the average
daily returns over reference period

Considering period from 2015 to 2018.

(CAC +0.0169%, DAX

+0.0145%, Eurostoxx50 +0.0033%, FTSEMIB +0.0181% and
Stoxx600 +0.0048%). Results suggest, that regarding the QE
announcements made after the January 2015, indices reacted
positively (6 situations out of 10 on CAC, with average upside
+0.65%, 7 situations out of 10 on DAX, Eurostoxx50 and
Stoxx600 with average upside +0.96%, +0.87% and +0.66%,
respectively, while FTSEMIB increased in 8 out of 10 situations
with average gain +0.55%).

Tab. 4: Descriptive overview of the EU indices’ excess returns

Descriptive

overview

CAC

DAX

Eurostoxx50

FTSEMIB

Stoxx600

Std. Dev.

overall

1.41%

3.01%

1.43%

2.51%

0.95%

Average excess

return

0.24%

0.28%

0.38%

0.58%

0.27%

Number of

positive returns

Positive returns

(Ratio)

57%

60%

63%

73%

Average upside

on pos. ret.

2.49%

2.29%

2.48%

2.66%

0.86%

Number of

negative

returns

Negative

returns (Ratio)

43%

40%

37%

27%

Average

downside on

neg. ret.

-2.84%

-2.83%

-2.89%

-3.15%

-1.35%

Note: Std. Dev. refers to standard deviation of daily excess
returns over examined period.
Source: Own elaboration.

We add on, that the ECB only approached closing of its APP
programme in December 2018. Hence, we find only two
tapering, policy normalizing or tightening-related
announcements from the ECB in our sample. First was made on
25

January 2018, where M. Draghi announced reduced monthly

pace of purchases from €60 bn to €30 bn, suggesting possible
end of the QE in September 2018. After this particular
announcement, we faced negative, however muted, reactions
(except from FTSEMIB): CAC -0.26%, DAX -0.89%,
Eurostoxx50 -0.36%, Stoxx600 -0.40%. Relative mild reactions’
magnitude could be consequence of already partially priced in
information by equities and other asset classes. We consider this
as a result of clear, foreseeable and stable communication from
the ECB, therefore clear understanding of the ECB’s reaction
function by market participants.

Tab. 5: Descriptive overview of the EU indices’ excess returns –
2015 onwards

Descriptive overview

(22.01.2015 onwards)

CAC

DAX

Eurostoxx5

FTSEMI

Stoxx60

Average excess return

0.25%

0.60%

0.37%

0.78%

0.36%

Number of positive returns

Positive returns (Ratio)

60%

70%

80%

70%

Average upside on pos. ret.

0.65%

0.96%

0.87%

0.55%

0.66%

Number of negative returns

Negative returns (Ratio)

40%

30%

20%

30%

Average downside on neg.
ret.

0.87%

1.55%

-1.06%

-1.05%

-1.01%

Source: Own elaboration.

On the other hand, this announcement was followed by
announcement made on 14

June 2017, where another

prolonging of programme came, with additional dovish remarks
towards rate hiking. Whatever anticipated this prolonging-related
information was, initial reactions overall were highly positive
(again, in line with our assumption, that prolonging or expanding
current programme cause positive reactions on equities): CAC
+1.33%, DAX 3.28%, Eurostoxx50 1.34%, FTSEMIB +1.26%,
Stoxx600 +1.86%. The second tapering related announcement
came on 13

December 2018. Besides announcing, that the QE

programme will end, which was, by the way already widely
expected, some significant, sentiment maintaining remarks came
along, such as: “Accordingly, the Governing Council intends to
continue reinvesting, in full, the principal payments from
maturing securities purchased under the APP for an extended
period of time past the date when it starts raising the key ECB
interest rates…” Initial reactions were therefore mixed (CAC -
0.10%, DAX +1.77%, Eurostoxx50 +0.26%, FTSEMIB +0.72%,

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