The Bank of Japan's equity purchases and stock illiquidity

Using the large-scale index-linked exchange-traded fund (ETF) purchase program of Bank Japan (BOJ), we examine role unconventional equity-based monetary policies in market liquidity underlying securities. a large sample Japanese stocks, document significant increase stock illiquidity when firm's ownership by BOJ increases. Intensified ETF arbitrage activities partially mediate such effect. The increased is concentrated among small and young firms those whose shares are likely subject to strong buying pressure. Finally, increases comovement reduces informational efficiency. • Do Japan's (BOJ) equity purchases affect illiquidity? Stock with BOJ. effect stronger for illiquid buy Increased explain illiquidity. Liquidity efficiency ownership.