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The Effects of the Political Turbulences on the Stock Exchange Indices

Author

Listed:
  • Simion Luciana

    (Bucharest University of Economic Studies. Doctoral School of Economics and International Business)

  • Antonia Mihai

    (Bucharest University of Economic Studies. Doctoral School of Cybernetics and Statistics)

Abstract

Political turbulence is known to influence the velocity of economic development and reduce investments. Our paper aims to point up the linkage between political instability and the evolution of the Romanian capital market. We model the volatility of two of the Bucharest Stock Exchange indices BET and BET-NG using a GARCH/ARCH approach for daily data between 2010 and 2021. Results highlight the interconnections between political and economic policy uncertainty and the financial market. In both cases, for BET and BET-NG, our study shows that different types of political events have different levels of influence on the indices’ volatility. Unexpected “shock” type events with negative impacts resulted in much higher volatility than positive events. When there were events that had fiscal connotations, they had a much greater power of penetration in the investment environment because it comes down to figures and calculations that had a direct, measurable impact. There is a need for political involvement, certainty, lack of ambiguity, and predictability, both from a legislative point of view and how it is applied.

Suggested Citation

  • Simion Luciana & Antonia Mihai, 2022. "The Effects of the Political Turbulences on the Stock Exchange Indices," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 1376-1389, August.
    • Handle: RePEc:vrs:poicbe:v:16:y:2022:i:1:p:1376-1389:n:40
    DOI: 10.2478/picbe-2022-0125
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    References listed on IDEAS

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    1. repec:agr:journl:v:11(588):y:2013:i:11(588):p:83-100 is not listed on IDEAS
    2. Antoniade Ciprian ALEXANDRU, 2013. "Studying The Volatility Of The Romanian Investment Funds With The Arch And Garch Models Using The "R" Software," Working papers 03, Ecological University of Bucharest, Department of Economics.
    3. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    More about this item

    Keywords

    political events; volatility; stock indices; policies;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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