Presidential Election and Portfolio Selections in the Nigeria Stock Exchange

Abstract

This study seeks to investigate the effect of presidential elections on investors" portfolio selection in Nigeria from 2003 to 2011. The regression analysis was used to identify the effects that election could have on stock prices in the country, while event study was applied to investigate the focused effects of election event on portfolio selection in the Nigerian stock exchange. Price index for high and medium capitalization stocks were used in the analysis. The study showed that there were low returns performance in the stock market during elections and that elections events have strong (generally) negative effects on abnormal returns for the selected companies in the Nigerian Stock Exchange. In addition, the study showed a negative relationship between the return and risk behaviour of selected companies and election announcement in Nigeria. It is recommended that government and relevant authorities should increase the surveillance of both the market and political system prior to the presidential election in order to curtail the instability during this period.

How do markets react to political elections during periods of insecurity and governance crises? Evidence from an African emerging democracy

“…For Nigeria, Aliyu (2019) finds evidence of positive stock market impact during the 2011 election. In contrast, Osamwonyi and Omorokunwa (2017) find evidence of a negative effect on stock prices of selected companies around the presidential elections that were held in 2003, 2007 and 2011. In another study, Osuala et al .…”

“…To capture market expectations before and after the 2015 and 2019 presidential elections, we follow Osamwonyi and Omorokunwa (2017) and apply the event study approach. We focus on aggregate abnormal returns of companies listed on the Nigerian all-share index over several time windows before and after the announcement day of the respective election results.…”

“…For Nigeria, Aliyu (2019) finds evidence of positive stock market impact during the 2011 election. In contrast, Osamwonyi and Omorokunwa (2017) find evidence of a negative effect on stock prices of selected companies around the presidential elections that were held in 2003, 2007and 2011. In another study, Osuala et al (2018 found that the 2015 Nigerian presidential election exerted a positive but insignificant impact on stock market performance, while Eboigbe and Modugu (2018) discover that industry stock returns tend to decline before then increase after the 1999, 2003, 2007 and 2011 elections. Scholars have long recognized the potential influence that psychological and social factors have on stock markets.…”

Dynamic links between the Nigerian equity market and those of selected regional and developed countries

“…Many studies have focused on the linkages stock prices have with local factors, including political factors like election announcements as contained in Osamwonyi and Omorounwa (2017) , Osual et al. (2018) ; macroeconomic factors as in Ali et al.…”

“…Many studies have focused on the linkages stock prices have with local factors, including political factors like election announcements as contained in Osamwonyi andOmorounwa (2017), Osual et al (2018); macroeconomic factors as in Ali et al (2015), Uwubanmwen and Omorokunwa (2015), Lawal et al (2016), Iheanacho (2016), Mroua andTrabelsi (2019), andManasseh et al (2019). Anaraki (2010) examined the relationship between the US Fed policies, financial crisis and the European equity market.…”