41 research outputs found
Political orientation of government and stock market returns
Prior research documented that U.S. stock prices tend to grow faster during Democratic administrations than during Republican administrations. This letter examines whether stock returns in other countries also depend on the political orientation of the incumbents. An analysis of 24 stock markets and 173 different governments reveals that there are no statistically significant differences in returns between left-wing and right-wing executives. Consequently, international investment strategies based on the political orientation of countries' leadership are likely to be futile.Stock market returns; Politics; Presidential puzzle
Stock market volatiltity around national elections
This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an Election Day, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets.Political risk; National elections; Stock market volatility
Institutional investors and stock market efficiency: The case of the January anomaly
In this paper, we investigate the effect of institutional investors on the January stock market anomaly. The Polish and Hungarian pension system reforms and the associated increase in investment activities of pension funds are used as a unique institutional characteristic to provide evidence on the impact of individual versus institutional investors on the January effect. We find robust empirical results that the increase in institutional ownership has reduced the magnitude of an anomalous January effect induced by individual investorsâ trading behavior.Institutional traders; Individual investors; January effect; Polish and Hungarian pension fund investors
Stock Market Volatility around National Elections
This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the countryspecific component of index return variance can easily double during the week around an Election Day, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets. --Political risk,National elections,Stock market volatility
Political Orientation of Government and Stock Market Returns
Prior research documented that U.S. stock prices tend to grow faster during Democratic administrations than during Republican administrations. This letter examines whether stock returns in other countries also depend on the political orientation of the incumbents. An analysis of 24 stock markets and 173 different governments reveals that there are no statistically significant differences in returns between left-wing and right-wing executives. Consequently, international investment strategies based on the political orientation of countries' leadership are likely to be futile. --Stock market returns,Politics,Presidential puzzle
Steht der deutsche Aktienmarkt unter politischem Einfluss?
Die vorliegende Arbeit untersucht den Zusammenhang zwischen politischen Zyklen und Aktienrenditen in Deutschland. Während sich die bis dato verfĂźgbaren Studien Ăźber politisch bedingte Aktienmarktanomalien auf die USA konzentrieren, analysieren wir deren Existenz in deutschen Aktienrenditen. Im Gegensatz zu den empirischen Ergebnissen fĂźr die USA zeigen sich fĂźr Deutschland keine Anomalienmuster in Akteinrenditen, die sich auf rechte oder linke Bundesregierungen zurĂźckfĂźhren lassen. In Ăbereinstimmungen mit den fĂźr die USA verfĂźgbaren Evidenzen ist auch fĂźr Deutschland von einem politisch beeinflussten Wahlzyklus in Akteinrenditen auszugehen. Zudem widerlegen unsere empirischen Ergebnisse fĂźr Deutschland die Hypothese, dass sich der US-amerikanische Wahlzyklus auch auf den deutschen Aktienmarkt Ăźberträgt. --Kapitalmarkteffizienz,Kapitalmarktanomalien,politische Aktienmarktzyklen
Credit Spreads and Equity Volatility during Periods of Financial Turmoil
We present a joint analysis of the term structure of credit default swap (CDS) spreads and the implied volatility surface for the United States and five European countries from 2007â 2012, a sample period covering both the Global Financial Crisis (GFC) and the European debt crisis. We analyze to which extent effective cross-hedges can be performed between the CDS and equity derivatives markets during these two crises. We find that during a global crisis a breakdown of the relationship between credit risk and equity volatility may occur, jeopardizing any cross-hedging strategy, which happened during the GFC. This stands in sharp contrast to the more localized European debt crisis, during which this fundamental relationship was preserved despite turbulent market conditions for both the CDS and volatility markets
Political and institutional aspects of stock return dynamics
Die vorliegende Dissertation untersucht den Einfluss politischer und institutioneller Faktoren auf die Kursentwicklung an internationalen Aktienmärkten. Im ersten Teil wird der Zusammenhang zwischen politischen Variablen und Aktienrenditen analysiert. Bei globaler Betrachtung lassen sich nur vereinzelt systematische Renditemuster in Abhängigkeit von Regierungsparteien oder dem Wahlzyklus feststellen. Im zweiten Teil wird jedoch nachgewiesen, dass Wahltermine mit einer deutlich erhÜhten Volatilität des Aktienmarkts einhergehen. Auch Determinanten dieser exzessiven Volatilität werden ermittelt. Der dritte Teil liefert neue Erkenntnisse zum Einfluss institutioneller Investoren auf die Effizienz des Aktienmarkts. Anhand zweier Schwellenländer mit spezieller Anlegerstruktur (Polen und Ungarn) lässt sich zeigen, dass erhÜhter institutioneller Handel zu einer Reduktion von Marktanomalien wie dem Januareffekt und dem Montagseffekt und damit zur Verbesserung der Markteffizienz beigetragen hat. This thesis investigates the impact of political and institutional
factors on international stock market dynamics. The first part analyzes
the behavior of stock market returns across political cycles. Systematic
return patterns induced by partisan effects or election cycles are
shown to be incidental rather than globally pervasive phenomena. The
second part examines stock market volatility around national elections
and finds that investors are exposed to substantial election risk.
Factors that magnify the election-induced excess volatility are
identified. The third part presents new empirical evidence regarding the
impact of institutional investors on stock market efficiency. For two
emerging markets with specific investor structure (Poland and Hungary),
it is argued that an increase in institutional trading after pension
system reforms has reduced the magnitude of stock market anomalies such
as the January effect and the Monday effect and thereby improved
informational efficiency
Stock market volatiltity around national elections
This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an Election Day, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets