Parliament Session Effect on the Indian Stock Markets
by Ram Kumar Kakani & Avinash S. Ghalke/ XLRI Jamshedpur - School of Business
February 2006, Source: SSRN
Abstract:
The presence of political risk is a worldwide phenomenon that has affected most national stock markets in the twentieth century. Within this context, it is often said that returns of the stock markets are affected by the Parliamentary happenings. Our study is a first examination of a wide range of questions on the relationship between the Parliament sessions and the stock market. Using past 14 years stock market data, we found that stock index returns are significantly lower and volatility is higher when Parliament is in-session as compared to Parliament in-recess. Put another way, using an “out-of-session” investment strategy by investing in BSE Sensex over the last 14 years would have led to growth in portfolio value by over nine times compared to an “in-session” investment strategy. The study concludes by discussing the influence of coalition governments, coalition politics, and gradual weakening of parliament among important factors driving these results.
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New and interesting take! but does indian politics really have an impact on the markets!!! The numbers say one thing but do the traders from the FII or MF's really look at the parliament before they make the buy/sell decisions??
Posted by
hershey |
2:31 AM
Thats true! But one thing is that Government usually, when in session, gives out some bad vibes (from The Left parties - pain in the neck!), which dampens the spirits. And, if there a hit on perception obviously market will underperform. (btw, investors need not worry much as most of these days parliament is adjourned...these days its pestisides in aerated drinks!)....Long Live India - toughs
Posted by
toughiee |
6:44 PM
i think vibes & perception lead to irrational exubarance. th're not mathematically proven techniques to gauge stock markets or prices. anyways, though that's a reality since man is a social and emotional animal.
Posted by
hershey |
7:52 PM
Surprising yet interestnig. The full work I could download from:
http://ssrn.com/abstract=889467
Posted by
Anonymous |
7:08 AM