Stock markets are very sensitive to events and information. There could be volatility in the stock prices either side based on the news. Events might be Natural disasters like Earthquakes and Man- made attacks like terrorism. For instance, the market today is interconnected. That is the earthquake which was occurred in the Indian ocean on December 26 ,2004, showed an impact on THE stock market by reducing the percentage of stock up to 3.8%.And also,from Oslo to London to Brazil to Brussels terrorist attacks would puncture the relative calm working world to enormous irregularity.After Paris attack on November 13,2015, the CAC 40 has dropped to 1% just after it opened.When it comes to information,the presidential elections of USA might impact the stock market worldwide. There was an illusion that the victory of Donald Trump would likely cause the stock market DJIA, -0.02% to crash and plunge the world into recession.
Is there any relation between US presidential elections and stock market worldwide?The US
presidential elections are the major event that takes place in every four years and affects economies all over the world. Election results not only influence the corporate performance but also on the stock market.Stock market participants incorporate their expectations about political changes into prices just before an election and adjust it according to the actual decision made following the election.Therefore future markets increase volatility in fixed elections due to uncertainty about the election results and their inference.The election process in some countries takes few weeks, but in United states ,the presidential candidates undergo a political marathon, negotiating primaries, party conventions, and electoral system. American politicians say the way they elect they president is one of the most open and democratic processes in the whole world. US presidential elections are always
held in November.
The presidential election begins with the primary elections and caucuses and moves to
nominating-conventions 3,during which political parties select a nominee to unite. The nominee also announces a vice presidential candidate at this time. The candidates then campaign across the country to explain their views and plans to voters and participant in debates with the candidates of other parties.And then comes the general election To win the election, a candidate must receive a majority of electoral votes. In the event no candidate receives the majority, the House of Representatives chooses the President and the Senate chooses the Vice President.
In this study, we examine the affects of the presidential elections on the stock price indices like NIFTY 50, NASDAQ, SSE and EUROSTOXX 50 which are related to India, USA, China, and Europe respectively. This study measures the stock price sensitivity to election results for the presidential elections from 1992 to 2016 that is since the establishment of NSE. Therefore we measure stock price returns in different countries for 5 months period prior and after the election.
1.Djia: Dow jones industrial average
the Dow, is a stock market index, and one of the several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow.
2.state primaries are run by state and local government. This voting occurs through a secret ballot.
Caucuses are private meeting run by political parties. In most, participants divide themselves into
groups according to the candidate they support and each group give speeches supporting its candidate and tries to persuade others to join its group.And the end they count the voters in each candidate’s group and calculate.
3.nominating conventions -the party normally knows who has won.
The delegates from each state formally choose their champion to go forward as the presidential candidate.
From the above, it could be easily said that the investing community as a whole and the academicians are interested in understanding the factors that influence the sensitiveness of the stock indices. The present paper is an attempt to understand and document the sensitiveness (volatility) of the select stock indices such as Nifty 50 of India, Nasdaq of the USA, SSE of China,Eurostoxx of Europe. For the purpose of the study, the time period of 1992 to 2016 has been chosen. This period coincides with the establishment of National Stock Exchange in India in 1992. The above stated
period covers five number of presidential elections.
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