The effect of Malaysia general election on stock market returns

Abstract

During the latest episode of general election held in Malaysia, it is observed that the FBMKLCI index was lifted 62.52 points in a day soon after the announcement of election outcome. Moreover, the index registered a highest gain of 96.29 points in the middle of the intra-day trade. This suggests that investors who had got the right direction could make profitable intra-day trading the next trading day of the general election date. Results from statistical analysis uncover significant before-election-effect and after-election-effect from the most recent general elections held in Malaysia. Different subsets of macroeconomic variables are found to have significant role on stock market return depending on the market situation. Remarkably, when there was close fight between the two major political parties during the 2008 and 2013 election years, political uncertainty showed up its negative and significant role in influencing the stock market return. The major implication of these findings is that while investors may seek abnormal returns before and after the next general election, which is around the corner, they will have to pay attention on the influence of macroeconomic variables and political uncertainty on stock market return during the election year.

General election effect on the network topology of Pakistan’s stock market: network-based study of a political event

“…Additionally, political events capture investor attention due to the possible revision of their investment strategies, depending on the outcome of the event (Pástor and Veronesi 2013). Previous research proposes various methods to study the impact of elections on stock markets [e.g., GARCH and Cumulative abnormal volatility (CAV) (Białkowski et al 2008), Support vector regression (Chiu et al 2012), Cumulative average abnormal returns (CAAR) and Abnormal returns AR (Oehler et al 2013;Savita and Ramesh 2015), Regression analysis (Abidin et al 2010;Liew and Rowland 2016) Granger cointegration and Johansen test (Goodell et al 2015), and DCC bivariate GARCH (Sultonov and Jehan 2018)].…”

The Portfolio Optimization Performance during Malaysia’s 2018 General Election by Using Noncooperative and Cooperative Game Theory Approach

“…During the general election years of 2008 and 2013, the market fluctuation due to political uncertainty did show its significance influence on stock market return compared to the general election years of 1995, 1999 and 2004 (Liew & Rowland, 2016). Hence the stock market return was unaffected during the general election atmosphere around 1995, 1999 and 2004, but political uncertainty in 2008 and 2013 affected the stock market return.…”

What Do Foreign Exchange Markets Say About Election Outcomes? A Comparison Between Malaysia, Singapore and Philippines

“…(i) Political events and financial marketsscope of study and key findings This study contributes to the literature on political events and how they affect the mean and volatility of returns in asset markets. We identify some of the studies that are relevant this area including Lobo and Tufte (1998), Bialkowski, Gottschalk and Wisniewski (2008) In most of the studies mentioned above, general elections and negative political news tend to lead to lower mean asset returns (Lean 2010;Liew and Rowland 2016) and increased volatility (Lobo and Tufte 1998;Bialkowski, Gottschalk andWisniewski 2008, Bowes 2018). However, Wong and Hooy (2016) and Chia (2018) are exceptions to the norm as asset market reactions may be muted.…”

“…To facilitate better understanding of the determinants of asset price behaviour, and how political risks may have a role to play, a burgeoning literature has emerged. One strand of the literature focuses on how political events affect stock market returns and volatility (Bialkowski, Gottschalk and Wisniewski, 2008;Durnev, 2010;Lean, 2010;Kollias, Papadamou and Stagiannis, 2011;Chesney, Reshetar and Karaman, 2011;Nazir et al, 2014;Yusoff et al, 2015;Liew and Rowland, 2016). Another strand of the literature examines the effects of political events on the foreign exchange markets (Lobo and Tufte, 1998;Mpofu and Peters, 2017).…”