Political instability and stock market returns: Evidence from OECD countries

Authors

  • Dimitrios Asteriou Oxford Brookes University Department of Accounting. Finance and Economics Wheatley Campus, Wheatley OX33 1HX, UK
  • Antonios Sarantidis Hellenic Open University School of Social Sciences Bouboulinas 57-59 T.K. 26226 Patras, Greece

DOI:

https://doi.org/10.17811/ebl.5.4.2016.113-124

Abstract

 

This paper examines the relationship between political instability and stock market returns using quarterly time series data from 1993 to 2013. In this paper, stock market returns are defined as the returns of the general stock market index and banking index for 18 OECD countries. Five different political instability indicators are constructed in order to measure political uncertainty. The empirical part utilizes the EFA, PCA and GARCH-M methodologies. The findings indicate a direct and an indirect impact between the PI indicators and the returns of the Banking Index and the Overall Stock Market Index. The research contributes to the literature by providing empirical evidence to policy makers on the effects that political instability has on stock markets.

 

Author Biographies

Dimitrios Asteriou, Oxford Brookes University Department of Accounting. Finance and Economics Wheatley Campus, Wheatley OX33 1HX, UK

BSc in Economics (UoM, Greece), MSc in Economics (UoM, Greece), PhD in Economics (City University London, UK)

Antonios Sarantidis, Hellenic Open University School of Social Sciences Bouboulinas 57-59 T.K. 26226 Patras, Greece

BSc in Economics (AuTH, Greece), MSc in Economic Analysis (UoP, Greece), PhD in Financial Econometrics (HOU, Greece)

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Published

24-10-2016

How to Cite

Asteriou, D., & Sarantidis, A. (2016). Political instability and stock market returns: Evidence from OECD countries. Economics and Business Letters, 5(4), 113–124. https://doi.org/10.17811/ebl.5.4.2016.113-124