Do political events have an impact on stock indices? Empirical research on emerging countries

Abstract

ABSTRACT Using synthetic control methods, we examined the economic effects of political uncertainty. We show that political uncertainty resulting from certain political events is negatively related to major stock indices. Particularly in emerging countries, political turmoil involving the president enormously increases the difficulty of doing business due to increased uncertainty in economic policy. Our results suggest that the beginning of the impeachment process and successful military coup could positively influence the stock market, while a military coup failure and an aircraft accident negatively influence the stock market. Therefore, market investors and business owners in emerging countries must be prepared for significant changes in the progress of a company, industry or sector after the event occurs.