Political instability and stock market returns: Evidence from OECD countries

Asteriou, Dimitrios; Sarantidis, Antonios

doi:10.17811/ebl.5.4.2016.113-124

Cited by 22 publications

(21 citation statements)

References 20 publications

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“…The authors concluded that positive news affects stock prices within one week, whilst negative news predicts low stock returns for up to one quarter. Asteriou and Sarantidis (2016) examined the relationship between political instability and stock market returns from 1993 to 2013 using quarterly time series data. They defined stock market returns as the returns of the stock market index and banking index.…”

Section: Miletić (2011) Investigated the Connection Between Dividend mentioning

confidence: 99%

Effects of Economic and Political Events on Stock Returns: Event Study of the Agrokor Case in Croatia

Škrinjarić

Orlović

2019

CES

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Major events in Croatia regarding economy and politics in the last three years have been related to the Agrokor concern. Agrokor is one of the biggest companies/ concerns in Croatia and Southeastern Europe. Since some of Agrokor's stocks are listed on the Croatian stock market, the economic and political events regarding Agrokor have affected the stock market as well to an extent. In this study we observe the effects of several economic and political events on stock returns on the Zagreb Stock Exchange, by dividing the sample into two groups. The first group consists of Agrokor's stocks and the other group consists of stocks of other companies which are listed and frequently traded on the market. The methodology used in the study was event study, by using parametric and nonparametric tests. The results indicate that specific economic and political events

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Section: Miletić (2011) Investigated the Connection Between Dividend mentioning

confidence: 99%

Effects of Economic and Political Events on Stock Returns: Event Study of the Agrokor Case in Croatia

Škrinjarić

Orlović

2019

CES

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“…Addoum and Kumar (2016) find that the political climate changes affect the returns of firms and industries that are politically sensitive. Using GARCH-M models, Asteriou and Sarantidis (2016) find a negative impact of the political events on the variance of general stock market returns. Further, political unrest, such as a revolution, coup attempts, government/regime changes, protests/demonstrations, strikes and unexpected elections, can have a great influence on a country's home currency.…”

Section: Literature Reviewmentioning

confidence: 96%

Stock market performance and foreign exchange market in Egypt: does 25th January revolution matter?

El‐Masry

Badr

2020

IJOEM

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PurposeThis paper examines the causal relationship between stock market performance and foreign exchange market in Egypt over the period 2009–2016. The study period is divided into two sub-periods: pre- and post-January 25th Egyptian revolution (ER). The reason is to examine how this revolution affects the causal relationship between the two markets' performance.Design/methodology/approachIn this study, the daily basis data are used to enable good and effective observation changes in the foreign exchange rate and stock market performance over time. Stock market indexes and stock market capitalization are used as proxies for stock market performance. Further, the Egyptian pound to US$ exchange rate is used as a measure for foreign exchange market performance. The study analysis is done in stages. The first is to check the variables' stationarity for the pre- and post-revaluation. The second is to examine the cointegration among the variables. The third is to run vector autoregression (VAR) estimates, after which VAR Granger causality tests are employed.FindingsThe results show that the data are not stationary at their levels but stationary in their first difference level while there is no cointegration in the long-run among the variables in both sub-periods. Further, findings indicate that, in the pre-January 25th revolution period, there is a significant causal relationship between the foreign exchange market and stock market indexes and a significant causal relationship between market capitalization (CAP) and exchange rate at the 1% level. However, in the post-January 25th revolution period, the study does not find a significant causal relationship between foreign exchange market and stock market indexes and capitalization.Research limitations/implicationsAs this study focuses on the causal relationship between foreign exchange and stock markets before and after the 25th January Revolution, other macroeconomic variables such as consumer price index, interest rate and GDP were excluded for the comparison purposes with other studies. Further research is suggested to include them in the analysis to find out its effect on the performance of stock market and foreign exchange market.Practical implicationsThe existence of long-run bidirectional causality means that portfolio managers and hedgers may have improved their understanding regarding the dynamic relationship between foreign exchange market and stock market performance as this may help them to plan and implement suitable hedging strategies to guard against currency risk in future crises or events. Investors, fund and portfolio managers and policymakers should give much attention to these event-specific interactions when they make capital budgeting decisions and implement regulation policies. Furthermore, our results may allow portfolio managers, investors and policymakers to assess the importance of informational efficiency for both markets.Originality/valueThis paper is an original contribution to the literature that concerns the causal relationship between stock market and foreign exchange market in the period of political instability and social unrest such as the January 25th Revolution in one of the emerging markets, namely Egypt.

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“…terms of trade (Chowdhury 2012), capital flows (Jongwanich and Kohpaiboon 2013;Bouraoui 2015), oil prices (Beckmann, Czudaj, and Pilbeam 2015;Basher, Haug, and Sadorsky 2016). Asteriou and Sarantidis (2016) noted that political uncertainty has a negative effect on stock returns. Bonfiglioli and Gancia (2018) show that economic uncertainty has positive and significant effects on the adoption of reforms.…”

Section: Political Stabilitymentioning

confidence: 99%

Does Budget Deficit and Political Stability Effect Real Exchange Rate in South Asian Countries?

Nabi

Bhat

Ghazanfar

2021

GMSR

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The study investigates the effect of political stability and budget deficit on the real exchange rate. We used a panel data set of south Asian countries, including Pakistan, China, Bangladesh and India. We applied the panel unit root test, Kaos panel Cointegration and fully modified the least square in the study to reach robustness of findings. Findings reveal that real exchange rate(RER) and political stability are positively related. It supports the argument that political stability attracts foreign investment, appreciates local currency, and leads to higher RER. However, results reveal that the budget deficit is not related to RER. This study provides new empirical evidence to policymakers and government officials that political stability encourages foreign investors and appreciates exchange rate.

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Political instability and stock market returns: Evidence from OECD countries

Cited by 22 publications

References 20 publications

Effects of Economic and Political Events on Stock Returns: Event Study of the Agrokor Case in Croatia

Effects of Economic and Political Events on Stock Returns: Event Study of the Agrokor Case in Croatia

Stock market performance and foreign exchange market in Egypt: does 25th January revolution matter?

Does Budget Deficit and Political Stability Effect Real Exchange Rate in South Asian Countries?

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