ABSTRACT
This core intent of this
study is to determine the effect of general elections results on the
performance of stock markets in emerging economies. This is necessitated by the
concern on whether financial markets are significantly impacted by political
environment during elections. The study focused on three general elections in
Nigeria; 2007, 2011 and 2015 general elections. The event study methodology was
adopted and analysed secondary data collected from the Nigerian stock exchange
for the periods of the 2007, 2011 and 2015 general election dates. The analysis
of the cumulative abnormal returns (CAR) found that the 2007 and 2011 general
elections were negatively significant which we suggest can be explained by the
increase in market uncertainty due to the political uncertainty while the CAR
for 2015 general election was found to be insignificant at 5% level of
significance. Therefore, the research study concludes that general elections
have significant impact on the performance of the stock market. The study recommends
that stock market regulators should carefully study political events in the
implementation of policies so as to protect the stock market against political
risk during general elections and to boost investor confidence in the market.
Also, investors should study the market in event of political elections so as
to properly understand the market and ensure that their investment in the
market yields a positive return.
TABLE OF CONTENTS
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Figures xi
Abstract xii
CHAPTER
1: INTRODUCTION
1.1 Background
Information 1
1.2 Statement
of the Problem 4
1.3 Objectives of the Study 6
1.4 Research
Questions 6
1.5 Hypotheses 6
1.6 Significance
of the Study 7
1.7
Scope of the Study
8
1.8 Limitation
of the Study
8
1.9 Operational Definition of Terms 8
CHAPTER 2: LITERATURE REVIEW
2.1 Conceptual
Framework 11
2.1.1 Electoral system
13
2.1.2 2007 Nigerian national election
14
2.1.3 2011 Nigerian national election 15
2.1.4 2015 Nigerian national election 15
2.1.5 Overview of the Nigerian stock exchange 16
2.1.6
The Growth of the Nigerian stock exchange 16
2.1.7
Development in the Nigerian stock exchange 17
2.1.8
Contribution of the stock market to capital
formation in Nigeria 18
2.1.9 Nature of investment in stocks 19
2.2 Theoretical
Review 20
2.2.1 Efficient market hypothesis 20
2.2.2 Criticism of efficient market hypothesis and
behavioural finance 22
2.2.3
Modern portfolio theory 23
2.2.4 Uncertain information hypothesis 24
2.2.5
Rational expectation theory 24
2.2.6
Political business cycle 24
2.3 Empirical Review 26
2.3.1 Pre-election period and the stock market 34
2.3.2 The Nigerian stock market and shareholders
expectation 35
2.3.3 Post-election period and the stock market 35
2.3.4 General elections and the stock market 36
2.3.5 Normal and abnormal returns 37
2.3.6. General elections and money market performance
38
2.3.7 Transition periods and foreign investment 39
2.3.8 Effect of political election on public and
private investment 40
2.3.9 Politics and stock market volatility 41
2.3.10 Investor sentiment and the stock market 42
2.3.11 Summary of literature 43
2.3.12
Research gaps 44
CHAPTER 3:
METHODOLOGY
3.1 Research Design 45
3.2 Area of Study 45
3.3 Sources and Methods of Data Collection 45
3.4 Sample Selection 46
3.5 Technique of Data Analysis 46
3.6
Models Specification 47
3.7 Description of Variables 55
CHAPTER 4: DATA
PRESENTATION AND RESULTS
4.1 Introduction
56
4.2 Test
of Hypothesis One 57
4.3 Test of Hypothesis Two 59
4.4 Test of Hypothesis Three 60
4.5
Test of Hypothesis Four
61
4.6. Discussion 64
CHAPTER 5:
SUMMARY CONCLUSION AND RECOMMENDATIONS
5.1 Summary 67
5.2 Conclusions 68
5.3 Recommendations 69
5.4
Suggestion for Further Studies 69
5.5 Contribution to Knowledge 70
REFERENCES 71
APPENDICES 78
LIST OF TABLES
Table Page
3.1:
Variables used in the study 55
4.1:
sample companies listed in the Nigerian stock market 56
4.2:
Definition of events for the study 57
4.3:
Result of average abnormal returns and CAR for H01 58
4.4:
Result of average abnormal returns and CAR for H02 59
4.5:
Result of average abnormal returns and CAR for H03 60
4.6:
Test for Arch Effect 62
4.7:
GARCH (1,1)- Normal 63
LIST OF FIGURES
Figure Page
1: Illustration of the year to date (YTD)
of industry sector performance in
the Nigerian
stock market 18
2: Definition of the estimation period 47
ALPHONSUS, A (2023). Impact Of Elections Results On The Performance Of The Nigerian Stock Market. Mouau.afribary.org: Retrieved Dec 25, 2024, from https://repository.mouau.edu.ng/work/view/impact-of-elections-results-on-the-performance-of-the-nigerian-stock-market-7-2
AZUBUIKE, ALPHONSUS. "Impact Of Elections Results On The Performance Of The Nigerian Stock Market" Mouau.afribary.org. Mouau.afribary.org, 14 Sep. 2023, https://repository.mouau.edu.ng/work/view/impact-of-elections-results-on-the-performance-of-the-nigerian-stock-market-7-2. Accessed 25 Dec. 2024.
AZUBUIKE, ALPHONSUS. "Impact Of Elections Results On The Performance Of The Nigerian Stock Market". Mouau.afribary.org, Mouau.afribary.org, 14 Sep. 2023. Web. 25 Dec. 2024. < https://repository.mouau.edu.ng/work/view/impact-of-elections-results-on-the-performance-of-the-nigerian-stock-market-7-2 >.
AZUBUIKE, ALPHONSUS. "Impact Of Elections Results On The Performance Of The Nigerian Stock Market" Mouau.afribary.org (2023). Accessed 25 Dec. 2024. https://repository.mouau.edu.ng/work/view/impact-of-elections-results-on-the-performance-of-the-nigerian-stock-market-7-2