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Electoral information in developed stock market: testing conditional heteroscedasticity in the market model

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  • Chung-Chu Chuang
  • Yi-Hsien Wang

Abstract

This investigates the influence of major electoral information on abnormal returns around the announcement date in the developed stock market and examines whether these explanatory variables are associated with observed cumulative abnormal returns using a regression analysis. The analytical results demonstrate that average abnormal returns are significantly negative before the date of the announcement of the results of a general election, on days -6 and -3, and after that announcement date, on days +4, +6 and +10. This phenomenon can be attributed to hedging activity of the investors to reduce risk.

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  • Chung-Chu Chuang & Yi-Hsien Wang, 2010. "Electoral information in developed stock market: testing conditional heteroscedasticity in the market model," Applied Economics, Taylor & Francis Journals, vol. 42(9), pages 1125-1131.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:9:p:1125-1131
    DOI: 10.1080/00036840701721117
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