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Empirical Economics

, Volume 45, Issue 1, pp 23–38 | Cite as

Politics, stock markets, and model uncertainty

  • K. Peren Arin
  • Alexander Molchanov
  • Otto F. M. Reich
Article

Abstract

The available evidence on the effects of political variables on both returns and volatility of aggregate stock indices is scant and mixed. Applying Bayesian Model Averaging to a panel dataset of 17 parliamentary democracies spanning the post-war period until 1995, we test the robustness of political variables in explaining stock returns and stock return volatility. While we find that the influence of political variables on excess returns is weak, there is evidence of some political variables explaining return volatility.

Keywords

Panel BMA Excess returns Stock market volatility 

JEL Classification

C11 G11 G12 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  • K. Peren Arin
    • 1
  • Alexander Molchanov
    • 2
  • Otto F. M. Reich
    • 2
  1. 1.Zayed UniversityAbu DhabiUnited Arab Emirates
  2. 2.Massey UniversityAucklandNew Zealand

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