CHAPTER TWO LITERATURE REVIEW 2.0 Introduction The study explores the impact of general elections on the performance of FBM KLCI. Chapter Two presents the literature review of previous literature that is related to this study. There are five sections involved in this chapter, Section 2.1 discussed on the theoretical framework, Section 2.2 briefly explain the empirical model used, Section 2.3 dissembles the empirical testing procedures, Section 2.4 reviews the empirical evidence and Section 2.4 concludes the study. 2.1 Theoretical Framework From previous studies, there some theories put forward by researchers to explain the impact of general election on stock returns. The most commonly used theories are efficient market hypothesis mode and uncertain information hypothesis model. 2.1.1 Efficient Market Hypothesis Theory (EMH) The EMH model was first applied by Fama in 1965. He was the first scholar to employ the concept of EMH in stock market performance. When all the securities’ prices fully reflect all available information, the market is known to be efficient. This means that any new information hits the stock market, the stock price should not react based on that particular information under efficient market condition. However, there seems to have several phenomenons violating the concept of EMH. The phenomenon is known as market anomalies. For example, calendar effect, P/E effect and size effect. The market anomalies are not new to investors as it always occur in the world of stock market. In this study, the abnormal return during the election period is considered as market anomaly since it broke the concept of EMH. Therefore, it is interesting to know that this scenario belongs to which form of marke... ... middle of paper ... ...different testing procedures have been employed to study the impact of general elections on stock returns such as OLS method, conventional t-test, causality test and GARCH(p, q)-M model. Causality test is used to test whether general election is the one that affect stock returns or the other way around. Meanwhile, OLS method is to test whether the stock market behavior is significantly difference before and after general elections. Lastly is GARCH (p, q)-M model consider as suitable model to measure the short and long term memory in returns. Lastly, different empirical evidences were obtained from previous literature reviews. Some said that there is significantly different between the stock return during the election periods. And also, some researchers found that stock returns have positive effect under ruling coalition instead of under opposition coalition.
There are two sets of theories that explains why the President’s party loses seats in the midterm election. Those two theories are 1. The coattails / surge-and-decline and 2. The economic / popularity
The events that unfolded on September 11th and the days that followed also profoundly effected the stock market. It is the purpose of this paper is to examine what happened to both the Dow Jones Industrial Average and the NASDAQ after September 11th and how it is similar to events such as the bombing of Pearl Harbor, the Oklahoma City bombing, and the Gulf War in terms of how the stock market experienced a blow and bounced back after a while.
...phases. Fabozzi and Francis (1977) conducted a study testing the differential effect of bull and bear market conditions for 700 individual securities listed on the NYSE. It was found that the estimated betas of most of the securities were stable in both market conditions. However, Ray (2010) conducted a similar study over a period of ten years using monthly returns of 30 stocks. The results obtained were both mixed and inconclusive. Bowie and Bradford (1997) found that the tests of beta stability are difficult to interpret on their own. Gombola and Kahl (1990) suggest that an OLS estimate of beta requires an estimation period during which the relationship between the market return and the stock return remain stable. However, without this stability, an alternative for forecasting a time-varying relationship such as the Bayesian adjustment process will be required.
In turn everything in the present and the future is judged through the stocks as they hold a high importance in industrialized economies showing the healthiness of said countries economy. As investing discourages consumer spending over all decreases, it lead...
We analyzed the market for two weeks to determine when the equity market would turn from a bearish to bullish market. Without a change in the market and a declining bond price, we decided to invest in equities according to our investment strategy, which brought us into the second phase of our portfolio. Therefore, at the beginning of February we bought shares in Sirius, Microsoft, Neon, Washington Mutual, and Nike. As assumed, the equity market continued to plummet decreasing the value of all our stocks except for our Gold Corporation stock.
The project is done to find out the impact of stock split on the stock market. In our project, we have made use of event study methodology to assess the accuracy of stock price reaction of 39 public listed Indian companies in National Stock Exchange (BSE) in the year 2006 and onwards. The abnormal returns (actual returns-returns from regression line) results were taken for 20 days before and after the announcement date to test whether the result is significant or not (Level of significance=5%). The project shows that there is no significance difference in the price level before the announcement date while after the announcement date, there was a significant difference in the price level for few days(level of significance being 5%) The project supports the hypothesis that Indian stock market is semi strong efficient.
Every country differs in their preference of political system to govern their countries. For democratic countries, two possible choices of governing are the presidential system and the parliamentary system. Since both the presidential and the parliamentary systems have their own strengths and weaknesses, many scholars have examined these two forms of government, and debate on which political system is more successful in governance. In this paper, I will first provide a detailed analysis of both the parliamentary and the presidential system. I will also evaluate each system’s strengths and weaknesses, addressing any differences as well as any commonalities. Finally, I will conclude by using historical examples to analyze and support the presidential system, which would be a more desirable system for a democratic government.
Chapter 11 closes our discussion with several insights into the efficient market theory. There have been many attempts to discredit the random walk theory, but none of the theories hold against empirical evidence. Any pattern that is noticed by investors will disappear as investors try to exploit it and the valuation methods of growth rate are far too difficult to predict. As we said before the random walk concludes that no patterns exist in the market, pricing is accurate and all information available is already incorporated into the stock price. Therefore the market is efficient. Even if errors do occur in short-run pricing, they will correct themselves in the long run. The random walk suggest that short-term prices cannot be predicted and to buy stocks for the long run. Malkiel concludes the best way to consistently be profitable is to buy and hold a broad based market index fund. As the market rises so will the investors returns since historically the market continues to rise as a whole.
The efficient market hypothesis has been one of the main topics of academic finance research. The efficient market hypotheses also know as the joint hypothesis problem, asserts that financial markets lack solid hard information in making decisions. Efficient market hypothesis claims it is impossible to beat the market because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information . According to efficient market hypothesis stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments . In reality once cannot always achieve returns in excess of average market return on a risk-adjusted basis. They have been numerous arguments against the efficient market hypothesis. Some researches point out the fact financial theories are subjective, in other words they are ideas that try to explain how markets work and behave.
In the recent budget £800 million pounds has been allocated to schools, therefore they may use this to improve resources in schools, along with repairs and teacher recruitment. The general election could also affect our firm and the PC market. Different parties running in the election may have different views on the imports and exports legislation, e.g.... ... middle of paper ... ...
In the research by the Ahmad (2005) on the relationship among the daily closing price of the Bursa Malaysia Shariah index, EMAS index and the daily Malaysian three months T-bills rate. The results of the study reveal that the Bursa Malaysia Shariah index, EMAS index and three months T-bills share a long run relationship. In the short run, only changes in EMAS index tent to raise the value of BMSI and t-bills do not significantly affect both indices in Malaysia. As conclusion, the relationship between stock returns and interest rate is not stable over time and that there are differences among countries.
This essay will go step by step analyzing the advantages and disadvantages of presidential systems. Examples of countries will be concluded to each point. For every argument I tried to find a An interesting fact is, that every advantage can be seen from another point of view and I will like to show this in my essay.
This fusion of power allows the people’s representatives in the legislature to directly engage the executive in debates discussion in issues that will bring positive development in the state. This is not possible in the presidential system since the legislative and the executives arms are constitutionally separated and thereby restricted to engage the legislature in a discussion in which reasons are advanced against some proposition or proposal. The outcome is that party leaders in parliamentary system are more reliable than those in presidential systems. Presidential systems have turned the aim of electoral campaign into personalities rather than platform and programs because the focus is on the candidate and not on the party in general. But parliamentary systems on the other hand focus much more relating structured they do not do anything outside the scope of the party. We can compare the quality of leadership or administration in British, Canadian prime minister to the United State president. In all the country presidential system of government are chosen because people think been a good leader is by popularity and the ability to win election not minding if the candidate is fit for the task of presidency. But in parliamentary system, the person that has high quality of leadership competent enough and trustworthy is
The next important attribute to consider is the government’s ability to implement policies that they have passed. If these policies are against public opinion they will have a difficult time implementing them since they do not have an authoritarian or absolute rule. The government mus...
These benefits are best discovered and maximized if used in conjunction with KPIs. A KPI is a key performance indicator and they allow a company to measure and manage ...