Effect of Presidential Elections on the Stock Market

Abstract

This study seeks to determine the effect of presidential elections on the stock market in Kenya. The methodology used is event study methodology and the study looks at the 2017 election period, specifically the August initial elections and the October re-election. The key variables are NSE20 and the stock prices of every listed stock during the specified event windows. The study analyses the market as a whole and further subdivides it into its various sectors in order to analyse how different sectors are affected differently. The study finds that in the chosen event windows, the market as a whole is affected positively by the announcement of the results of the elections. Some sectors such as the commercial & services, energy & petroleum, manufacturing & allied sector and the telecommunication & technology sectors are affected positively by the announcement of the results of the elections. The agricultural sector is the only sector that is affected negatively by the announcement of the election results in both event windows.