Page 39 - Ekonomija i Biznis_noemvri 2016.indd
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In the focus РУБРИКА
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the performance of the financial market to a
great extent is significantly affected by the polit-
ical environment during the political cycles, that
is, elections
consideration, the conclusions on the im- tions.
pact of the political events for the move- On the other hand, another research
ment of the price of securities to a great
extent depend on the type of the election shows that the implications from the po-
process and the development stage of the litical elections for the investors in secu-
specific country. rities are material and relevant. The in-
vestors who feel aversion to risk require
The researches by a group of authors, appropriate higher premium as a replace-
performed separately, independently ment for the additional risk which they
from each other and in different time undertake. The research showed that the
(Niederhoffer, Gibbs and Bullock (1970), typical investor usually does not diversify
Peel and Pope (1993) and Gemmil (1992)) his portfolio in several different coun-
about the behavior of the prices of securi- tries, on the contrary, he makes the entire
ties during political elections in countries investment in a country where normally
with different level of development indi- political elections are periodically held.
cate price inefficiency of securities during Therefore, the research whether the in-
these processes, that is, a rule of profit- vestors in their rates of return appropri-
able trade. Although these were separate ately compensate the political risk related
researches, the common conclusion is to the elections is vital. The conclusion is
that the changes in the state administra- that the premium which is added in order
tion caused by the elections tend to affect to be able to compensate the political risk
the financial policies and laws which sig- related to the elections is modest and ac-
nificantly affects the prices of shares. ceptable only for the investors who have
low aversion to risk.
Campello (2007), came to a conclusion
that the election years could create an un- THE INFLUENCE OF THE PRESIDEN-
certainty which could affect the decisions TIAL ELECTIONS ON THE CAPITAL
and the behavior of the investors. The MARKET IN AMERICA
changes in the investment behavior are
observable from the stock exchange ac- If we focus on the numbers and the
tivities. The bear market tends to occur at history in the past 100 years in America,
the end of the mandate of a specific politi- the conclusion is that the capital mar-
cal party in power, while the bull market ket shows better performances when a
occurs two or three years after the elec- democratic president leads the country.
November 2016 39
