The development of financial markets is often closely related to national political and economic events, and Taiwan's stock market is a relatively small financial market, so it is more likely to cause fluctuations due to special events. The presidential election is a political event held every four years in Taiwan. The impact of this event on the financial market has attracted the attention of many researchers and investors.
This study will explore the stock price changes of Financial Holding Companies during a total of five presidential election campaigns from 2004 to 2020. The stock price return sample is taken from the Taiwan Economic News database, and the mean-adjusted return model in the event study is used to analyze whether there are abnormal returns in the stock price.
The verification results of this article can be summarized into the following two points: 1. Financial Holding Companies did produce abnormal returns one month before the presidential election, and it was positive and significant. That is to say, the headline “election bull run” that you see in the media before every presidential election is not unfounded. 2. Financial Holding Companies also experienced a positive and significant abnormal rate of return after the presidential election. The abnormal rate of return after the election was even higher than before the election, indicating that uncertainty may be eliminated after the election, resulting in a short-term rise in the post-election celebration market. Empirical results show that there are positive and significant abnormal returns before and after the election.
