Influence of German Bundestag Elections on the Stock Market Performance in Visegrad Group Countries

• Thesis title in Czech: Efekt německých voleb na vývoj akciových trhů Visegradských zemí
• Thesis title in English: Influence of German Bundestag Elections on the Stock Market Performance in Visegrad Group Countries
• Key words: Spolkový sněm, volby, studie událostí, výnosy, akciové trhy
• English key words: Bundestag, elections, event study, returns, stock markets
• Academic year of topic announcement: 2012/2013
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: prof. Roman Horváth, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 18.06.2013
• Date of assignment: 18.06.2013
• Date and time of defence: 23.09.2015 00:00
• Venue of defence: IES
• Date of electronic submission: 31.07.2015
• Date of proceeded defence: 23.09.2015
• Opponents: doc. PhDr. Julie Chytilová, Ph.D.

Preliminary scope of work in English

Topic Characteristics:
This thesis will deal with the behaviour of stock market during the period of election process. I will focus on the influence of elections to the German Bundestag on stock market performance of the countries allied in Visegrad Group. Germany is a major export partner for all members of Visegrad group - the Czech Republic, Hungary, Poland and Slovakia. In context of literature giving evidence that there is an abnormal return around domestic political election dates I will examine if there is also an abnormal return on stock markets of countries with strong relationship to the voting country. I will also compare the influence of domestic elections to influence of elections to German Bundestag on domestic stock market. For analyzing stock market performance I will use daily stock return data for individual country indices prior and after to the Bundestag elections during the sample period 1994-2013. The main goal of this work is thus to answer the question whether the fact that Germany is the biggest export partner for each Visegrad Group country and performance of German economy is therefore important for performance of economies of countries allied in Visegrad Group means that Bundestag election influences their stock markets. Contribution of this thesis will be by providing important insight into the links between stock market performance and political issues for countries in Central Europe. To my knowledge similar research has not been carried out yet.

Hypotheses:
1. There are abnormal returns on stock markets in Visegrad Group countries around the date of German Bundestag elections.
a. Are there higher abnormal returns on the stock market in Visegrad Group countries with higher share of export of goods and services on GDP around the date of German Bundestag elections?
b. Are there higher abnormal returns on the stock market in Visegrad Group countries with higher share of export of goods and services to Germany around the date of German Bundestag elections?
2. There are abnormal returns on stock markets in Germany around the date of German Bundestag elections.

Methodology:
I am going to employ the event study methodology. Using event study methodology I will measure the effect of elections to the German Bundestag on the stock market in Visegrad Group countries (in the reference period were held six elections: 1994, 1998, 2002, 2005, 2009 and 2013). The aim of a researcher in event study methodology is to deduce the significance of an event. In our case it means, whether an abnormal return on stock markets of countries allied in Visegrad Group is associated with the elections to the Bundestag. By measuring the abnormal returns (and also cumulative abnormal returns) I will estimate the influence of the event. I follow Cambell, Lo & MacKinlay (1997) where event study methods are lucidly reviewed and summarized. For each election I will analyze AR and CAR for pre-event window, event window and post-event window. I will use the mean-adjusted return model to measure normal returns.
I will use daily data on these stock indices: PX for the Czech Republic, BUX for Hungary, DAX for Germany, WIG for Poland and SAX for Slovakia.

Outline:
1. Introduction
2. Literature review
3. Hypotheses
4. Methodology
a. Event study methodology
b. Outline
c. Robustness check
d. Methodological issues
5. Data
a. Bundestag Elections
b. Stock Exchanges
6. Empirical results
7. Conclusion

Core Bibliography:
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