Work detail

Influence of German Bundestag Elections on the Stock Market Performance in Visegrad Group Countries

Author: Bc. Jakub Skála
Year: 2015 - summer
Leaders: prof. Roman Horváth Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 116
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/138247/
Abstract: This thesis deals with the behaviour of stock markets during the period of election process.
We focus on the influence of elections to the German Bundestag on stock market performance
of the countries allied in Visegrad Group during the reference period 1994-2013 covering six
Bundestag elections. Germany is a major export partner for all members of Visegrad Group -
the Czech Republic, Hungary, Poland and Slovakia. We examine whether there are abnormal
returns on stock markets in Visegrad Group countries around the date of German Bundestag
elections. We thus examine if the fact that performance of German economy is important for
performance of economies of countries allied in Visegrad Group means that Bundestag
elections influences their stock markets. We also analyze the influence of elections to German
Bundestag on domestic stock market during the reference period 1961-2013. To measure the
effect of elections we employ event study methodology using the mean-adjusted return model
to measure normal returns. Our event window consists of 65 trading days around the election
day (-15,50). We use the estimation window of 100 days (-150,-51). We assess our main
hypothesis for each country around every Bundestag elections in our reference period
separately over three event windows and also over eight event windows of various length
(from 5 to 65 days) for all Visegrad Group country indices altogether also around every
Bundestag elections. Statistically significant cumulative abnormal returns (CAR) of PX index
over the whole event period (-15,50) are in 1994, 2009 and 2013, CARs of SAX index in
1998, 2005 and 2009, CARs of BUX index in 1994, 1998 and 2002 and CARs of WIG index
in 1994. Statistically meaningful CARs for all indices are thus only in 1994. Significant
cumulative average abnormal returns (CAAR) across all indices are significant at least over
three event windows in 1994 (seven) and 2009 (six). CARs over the whole event period of
DAX index are statistically significant only in 1987 and 1990. The lack of literature
concerning this theme in Central and Eastern Europe has encouraged us to try to provide
insight into the links between stock market performance and political issues for countries in
Central Europe. To our knowledge similar research has not been carried out yet.

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