재무연구 제 권 호 (2016년 5월)
Asian Review of Financial Research, Vol., No..
pp.1573~1628
pp.1573~1628
Stock Market Consequences of Political Vibrancy
Christos Pantzalis Department of Finance, College of Business, BSN 3403, University of South Florida, Tampa, FL 33620, Phone
Jung Chul Park Department of Finance, College of Business, BSN 3403, University of South Florida, Tampa,
We test the hypothesis that value-relevant information diffuses faster (slower) into stock prices of firms located in areas with (without) geographic ties to powerful politicians. Using two alternative measures of such ties as proxies for a location’s political vibrancy, we show that there is more value-relevant information generated in politically vibrant areas, and that equity markets in these areas tend to be somewhat segmented from the rest of the country. Accordingly, stock returns of firms from politically vibrant areas predict those in non-vibrant areas. Consistent with the notion that an area’s political vibrancy can affect local investor ability to process complicated information in a timely manner, this return predictability pattern is more pronounced among large firms and during periods characterized by higher uncertainty traced to random events constituting exogenous political shocks.
Christos Pantzalis
Jung Chul Park
We test the hypothesis that value-relevant information diffuses faster (slower) into stock prices of firms located in areas with (without) geographic ties to powerful politicians. Using two alternative measures of such ties as proxies for a location’s political vibrancy, we show that there is more value-relevant information generated in politically vibrant areas, and that equity markets in these areas tend to be somewhat segmented from the rest of the country. Accordingly, stock returns of firms from politically vibrant areas predict those in non-vibrant areas. Consistent with the notion that an area’s political vibrancy can affect local investor ability to process complicated information in a timely manner, this return predictability pattern is more pronounced among large firms and during periods characterized by higher uncertainty traced to random events constituting exogenous political shocks.
