Journal of Finance and Economics
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Journal of Finance and Economics. 2020, 8(3), 116-126
DOI: 10.12691/jfe-8-3-4
Open AccessArticle

Presidential Elections and Stock Market: A Comparative Study

Nada Hashim1 and Dalia El Mosallamy1,

1Business Administration, The British University in Egypt, Egypt

Pub. Date: June 04, 2020

Cite this paper:
Nada Hashim and Dalia El Mosallamy. Presidential Elections and Stock Market: A Comparative Study. Journal of Finance and Economics. 2020; 8(3):116-126. doi: 10.12691/jfe-8-3-4

Abstract

Purpose- This paper is an event study that aims to find empirical evidence on the significance of the impact of presidential election outcome announcements on stock market return volatility in emerging markets versus developed markets; an application on the Egyptian and the US markets. Design/Methodology/ Approach- A mixed methods approach, combining qualitative data to guide sample selection and quantitative analysis to predominately conduct the empirical test was employed. The study used the mean-adjusted return model on secondary data collected for the EGX100 and S&P500 indices, for a single comparable election from each country. Findings- The empirical results show that presidential elections have no significant impact on stock market volatility in both markets, although the data suggests an increase in abnormal returns and a volatility decrease after each relevant election announcements. It is concluded that both markets efficiently absorb the news and reflect it into stock prices, as no statistically significant shifts in volatility can be detected. Originality/ Value- This study is unique as no existing studies addressed the issue of comparing different markets’ behaviour to presidential outcome announcements, and whether markets at different economic development stages may present similar efficiency in reacting to presidential elections. This can provide insight on emerging market behaviour, compared to developed markets, contributing to the comprehension of investors, academics and policymakers.

Keywords:
event study presidential elections stock market volatility market efficiency

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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