Abstract
This study extends the conditional regression model for event study analyses to include sub-events related to the events under investigation. The extended model ensures that all relevant sub-events are included in the event window and their significant effects are not averaged out. The model is applied to analyze the effects of Thailand’s 2019 general election on stock market performance. Information on the election day and the sub-event days before and after the election day contributed to the significant election effects. The inclusion of sub-events in the analysis is important and useful.
Highlights
A general election is an important event to which investors give considerable attention
Studies were conducted for Indonesia, Malaysia, Pakistan, and Taiwan by Imelda, Siregar, and Anggraeni (2014), Redzwan, Musa, Latip, Latif, and Rahman (2019), Khan, Jafri, Baig, Shaique, and Usman (2017), and Hung (2011), respectively
With respect to the information induced by sub-events before and after the event day, this study proposes that event study analyses should extend the event window and that stock price performance on the days surrounding the event as well as sub-event days should be examined
Summary
A general election is an important event to which investors give considerable attention. Through their votes, investors can influence the outcome; the media, poll makers, and analysts actively collect and disseminate information about the election to the market; and, as the election date approaches and it becomes clearer and clearer which party will win the election, investors gradually update their expectations about the party’s proposed economic policies and their implications for stocks (Panzalis, Stangeland, & Turtle, 2000). The effects of general elections on stock market performance have been studied extensively by researchers. Stock movement surrounding the election date reveals how investors revise their expectations and react to the realizations. Event study analyses are a popular approach to test these effects. The results in terms of performance direction and significance are inconsistent from one country or election to another
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