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Shehu Aliyu

West African Journal of Monetary and Economic Integration, 2019, vol. 19, issue 1, 40-56

Abstract: Evidences thrive on the effects of political regimes and presidential elections on stock market returns. This paper investigates the effects of presidential elections on stock returns around the election periods at the Nigerian Stock Exchange (NSE) market. A sample of five (5) months each for a total of six (6) presidential elections held between 1999 and 2019 was employed. Returns were calculated using daily closing prices of NSE’s all share index (ASI). Afterwards, the regime heteroskedastic Markov switching model was found fit for the data. Empirical results typify the daily stock returns in terms of bear (low) and bull (high) regimes. Bear regime (1) leads across the 6 election horizons with lower volatility while the bull regime (2) records higher volatility in addition to more positive returns. Specifically, presidential election impacts positively on stock returns only during the 2011 election. Besides, findings show that stock market returns during presidential elections when the PDP government was in office were bearish whereas the market returns were bullish for elections held when the APC government was in office. To achieve stability in the market and the economy at large, restraints on the side of fiscal authority and setting limits on election/campaign spending could help in forestalling upheavals in the market around presidential elections in Nigeria.

Keywords: Presidential election; stock market returns; Markov regime switching model; dummy variable (search for similar items in EconPapers)
JEL-codes: C22 G12 G17 P16 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Do presidential elections affect stock market returns in Nigeria? (2019) Downloads
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