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Empirical analysis of political uncertainty on TAIEX stock market

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  • Yi-Hsien Wang
  • Chin-Tsai Lin

Abstract

This article examines the relationship of between political activity and TAIEX stock market behaviour by the asymmetric GARCH. The results found that the congressional effect is negative on stock returns but volatility is not significant. The congressional effect on stock market returns following financial reform significantly dropped before financial reform, and significantly exceed for the volatility in the same circumstances. These results provide evidences that investors would hold a conservative position during the congressional sessions.

Suggested Citation

  • Yi-Hsien Wang & Chin-Tsai Lin, 2008. "Empirical analysis of political uncertainty on TAIEX stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 15(7), pages 545-550.
  • Handle: RePEc:taf:apeclt:v:15:y:2008:i:7:p:545-550 DOI: 10.1080/13504850600592507
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    7. Michael, Panos & Nobay, A Robert & Peel, David A, 1997. "Transactions Costs and Nonlinear Adjustment in Real Exchange Rates: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 862-879, August.
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