Are stock returns elevated under left-wing governments in Finland? The evidence from 1917-2007

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dc.contributor Aalto-yliopisto fi
dc.contributor Aalto University en Isoranta, Tero-Tapio 2016-08-16T11:35:50Z 2016-08-16T11:35:50Z 2014
dc.description.abstract PURPOSE OF THE STUDY The purpose of this study is to determine whether or not stock returns are higher under left wing governments. The common wisdom might be that right-wing, fiscal conservative, parties are better for economics but the results obtained in studies have been contrary, and mixed. This study will add to the discussion by studying this effect in Finland. Finland has a multi-party parliamentary system, unlike many countries including the United States, and this study contributes by creating a freely varying leftist variable for governments instead of using binary values. Additionally, I have newly created a long-term Finnish stock index dating back to 1917. DATA AND METHODOLY The main data set is comprised of monthly observations for value and equal-weighted total return indexes from the Finnish stock market during a time period between 1917 and 2007. In order to evaluate Finnish governments over the decades I created a (non-binary) political variable that encapsulates the left-right -wing orientation of sixty-two governments incumbent during the time period. To test my hypothesis I complete univariate analysis and ran a series of regressions. I conduct OLS regression on value-weighted and equal-weighted real and excess stock returns alike. To obtain robust results with long time series I will also utilize GARCH regressions for the same variables. All the regressions are both with binary left-right and freely varying "leftist" variables. To determine, if possible, abnormal returns are expected or not, I will also test for election shocks. A greater volatility (risk) of stock returns for left or right-wing governments can explain a difference in stock returns levels as well, and it will be further examined in this study. RESULTS Similar to earlier studies, I find significant abnormal excess returns and non-significant real returns during incumbencies of left-wing governments. The results are more evident when using freely varying leftist variables. Interestingly, abnormal left-wing returns are realized around the election months. Inflation and volatility are on average higher for left-wing governments but this does not alone explain the abnormal stock returns under left-wing governments' incumbencies. en
dc.format.extent 70
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.title Are stock returns elevated under left-wing governments in Finland? The evidence from 1917-2007 en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Rahoituksen laitos fi
dc.contributor.department Department of Finance en
dc.subject.keyword Presidential premium
dc.subject.keyword left-wing government
dc.subject.keyword stock returns
dc.identifier.urn URN:NBN:fi:aalto-201609083568
dc.type.dcmitype text en
dc.programme.major Rahoitus fi
dc.programme.major Finance en
dc.type.ontasot Pro gradu tutkielma fi
dc.type.ontasot Master's thesis en
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon osakemarkkinat
dc.subject.helecon stock markets
dc.subject.helecon tuotto
dc.subject.helecon rate of return
dc.subject.helecon taloudellinen kehitys
dc.subject.helecon industrial development
dc.subject.helecon politiikka
dc.subject.helecon politics
dc.subject.helecon sijoittajat
dc.subject.helecon investors
dc.ethesisid 14532 2014-07-02
dc.location P1 I

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