Stock market volatility during the general election. Jurnal Ekonomi Malaysia, 53 (3). pp. 43-57. ISSN 2716–6058 (2019)
Abstract
This study examines the effect of general election on the Malaysian stock market for the period of January 1994 to
December 2015. The empirical model used in this study follows the Threshold GARCH model developed by Glosten
et al. (1993), to investigate the stock returns and return volatility of the FTSE Bursa Malaysia KLCI and ten selected
main sectoral indices before and after the elections. The selection of the event window is in line with the Malaysian
general election process. Moreover, the full sample is divided into two sub-samples (1994-2005 and 2006-2015)
to avoid erroneous inferences, and to refect the real stock market volatility under two different political situation.
Generally, results from statistical analysis uncover signifcant pre-general election effect and post-general election
effect from the fve most recent general elections held in Malaysia. Interestingly, the two sub-samples showed
different election effect on stock market volatility. Most of the sectoral indices have lower volatility before general
election and higher volatility after general election in the sub-sample period of 1994-2005. Remarkably, during the
2008 and 2013 general election years, political uncertainty due to the close fght between the two major political
parties showed up its negative and signifcant infuence in the stock market volatility before general election. The
major implication of these fndings is that while investors seek abnormal returns on certain sectors during the next
general election, they will have to pay attention to the infuence of political uncertainty on the stock market return
during the general election year.
| Item Type: | Article |
|---|---|
| Keywords: | Stock market volatility, Threshold GARCH model, Political uncertainty, Stock market |
| Taxonomy: | By Subject > Business & Management > Economics By Subject > Business & Management > Finance |
| Local Content Hub: | Subjects > Business & Management |
| Depositing User: | Eza Eliana Abdul Wahid |
| Date Deposited: | 06 Oct 2021 23:38 |
| Last Modified: | 12 Oct 2021 09:18 |
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