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The Effects of the Political Turbulences on the Stock Exchange Indices

Simion Luciana () and Antonia Mihai ()
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Simion Luciana: Bucharest University of Economic Studies. Doctoral School of Economics and International Business
Antonia Mihai: Bucharest University of Economic Studies. Doctoral School of Cybernetics and Statistics

Proceedings of the International Conference on Business Excellence, 2022, vol. 16, issue 1, 1376-1389

Abstract: Political turbulence is known to influence the velocity of economic development and reduce investments. Our paper aims to point up the linkage between political instability and the evolution of the Romanian capital market. We model the volatility of two of the Bucharest Stock Exchange indices BET and BET-NG using a GARCH/ARCH approach for daily data between 2010 and 2021. Results highlight the interconnections between political and economic policy uncertainty and the financial market. In both cases, for BET and BET-NG, our study shows that different types of political events have different levels of influence on the indices’ volatility. Unexpected “shock” type events with negative impacts resulted in much higher volatility than positive events. When there were events that had fiscal connotations, they had a much greater power of penetration in the investment environment because it comes down to figures and calculations that had a direct, measurable impact. There is a need for political involvement, certainty, lack of ambiguity, and predictability, both from a legislative point of view and how it is applied.

Keywords: political events; volatility; stock indices; policies (search for similar items in EconPapers)
JEL-codes: C10 G14 G18 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:poicbe:v:16:y:2022:i:1:p:1376-1389:n:40

DOI: 10.2478/picbe-2022-0125

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