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Politics and elections at the Spanish stock exchange

Author

Listed:
  • Ángel Pardo Tornero

    (Dpto. Economía Financiera y Actuarial)

  • María Dolores Furió Ortega

    (Universitat de València)

Abstract

This paper examines the influence of Spanish major political events on the stock market performance. The analytical results demonstrate that there are no systematic differences in excess returns in the last two years preceding an election, that market responses are of the same magnitude when incumbents win or lose the election, and that there is no difference between the excess returns during left-leaning and right-leaning governments. Regarding to the stock market performance around election dates, negative price changes are observed in the days prior to elections, reverting to positive once the election takes place. Our results are in line with the work of Brown, Harlow and Tinic (1988) on the Uncertain Information Hypothesis that postulates that volatility of stock returns increases following the arrival of unexpected information and prices rise as uncertainty is resolved.convirtiéndose en incrementos con posterioridad a las mismas. Estos resultados son consistentes con la hipótesis de información incierta de Brown et al. (1988), de acuerdo con la cual, la volatilidad de los rendimientos de las acciones se incrementa con la aparición en el mercado de información que no se esperaba y los precios se recuperan a medida que desaparece la incertidumbre. Este trabajo examina la influencia de la política en el comportamiento del mercado bursátil español. Analíticamente se demuestra que no hay diferencias sistemáticas en los rendimientos anormales de las acciones durante los dos años anteriores a la celebración de elecciones, que la respuesta del mercado es la misma con independencia de que un determinado partido revalide su victoria electoral y que no existen diferencias entre los rendimientos anormales de las acciones observados bajo gobiernos de izquierdas o de derechas. Con respecto al comportamiento de las acciones durante el periodo anterior y posterior a la fecha de las elecciones, se observan disminuciones en los precios en los días previos a las elecciones

Suggested Citation

  • Ángel Pardo Tornero & María Dolores Furió Ortega, 2010. "Politics and elections at the Spanish stock exchange," Working Papers. Serie EC 2010-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasec:2010-11
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    File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2010-11.pdf
    File Function: Fisrt version / Primera version, 2010
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    References listed on IDEAS

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    More about this item

    Keywords

    política; rendimientos anormales; comportamiento del mercado bursátil politics; excess returns; stock market performance;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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