EconPapers    
Economics at your fingertips  
 

The economic record of the government and sovereign bond and stock returns around national elections

Stefan Eichler and Timo Plaga

Journal of Banking & Finance, 2020, vol. 118, issue C

Abstract: This paper investigates the role of the fiscal and economic record of the incumbent government in shaping the price response of sovereign bonds and stocks to the election outcome in emerging markets and developed countries. For sovereign bonds in emerging markets, we find robust evidence for higher cumulative abnormal returns (CARs) if a government associated with a relatively low primary fiscal balance is voted out of office compared to elections where the fiscal balance was relatively high. This effect of the incumbent government's fiscal record is significantly more pronounced in the presence of high sovereign default risk and strong political veto players, whereas the quality of institutions does not explain differences in effects for different events. We do not find robust effects of the government's fiscal record for developed countries and stocks.

Keywords: Fiscal balance; Political risk; Sovereign bond returns; Stock returns; Elections; Event study; Emerging markets; Developed countries (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 H11 H62 H63 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426620300996
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:118:y:2020:i:c:s0378426620300996

DOI: 10.1016/j.jbankfin.2020.105832

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

 
Page updated 2020-10-17
Handle: RePEc:eee:jbfina:v:118:y:2020:i:c:s0378426620300996