Empirical investigation of general election on stock market: A Malaysian case

xvi CHAPTER 1: INTRODUCTION.1 1.0 Introduction.1 1.1 Research Background . 1 1.1.1 Election and Stock Markets.3 1.2 Problem Statement.7 1.2.1 Scarcity of Past Research . 9 1.2.2 The Need to Further Into Sectoral Industry Analysis . 10 1.3 Research Objectives.10 1.3.1 General Objective.10 1.3.2 Specific Objectives.11 1.4 Research Questions.11 1.5 Research Hypothesis.12 Empirical Investigation of General Election on Stock Market: A Malaysian Case vii 1.5.1 Impact of Malaysian General Election on KLCI and Sectoral. Indices . 12 1.5.2 Consistency of Uncertain Information Hypothesos (UIH) on the . reaction of stock market following unexpected information . 13 1.6 Significance of the Study.13 1.7 Chapter Layout . 14 1.8 Conclusion . 15 CHAPTER 2: LITERATURE REVIEW.16 2.0 Introduction.16 2.1 The Process of General Election.16 2.2 Political Climate in Malaysia.18 2.3 The Malaysian Stock Market.20 2.4 KLCI and SectoralIndices Information . 22 2.5 Review on the Relationship Between Elections and Stock Market.26 2.6 Review on the Impact of Political News on Stock Price Movement.30 2.7 Review on the Theory and Empirical Work of Efficient Market . Hypothesis (EMH), Overreaction Hypothesis (OH) and Uncertain . Information Hypothesis (UIH) . 34 2.8 Event Study.42 2.9 Proposed Theoretical Framework . 44 2.10 Hypothesis Development . 45 2.10. 1 Impact of Malaysian General Election on KLCI and Sectoral. Indices . 46 2.10. 2 Consistency of UIH on the reaction of stock market following. unexpected information . 46 2.11 Conclusion . 47 CHAPTER 3: METHODOLOGY . 48 3.0 Introduction.48 3.1 Research Design . 48 3.1.1 Event Study on 12 and 13 Malaysian General Election.49 Empirical Investigation of General Election on Stock Market: A Malaysian Case viii 3.1.2 Event Study on the Consistency of UIH on the Reaction of Stock . Market upon the Arrival of 12 and 13 Malaysian General. Election.53 3.2 Data Collection Method.55 3.3 Data Adjustment Method.56 3.4 Research Instrument . 57 3.4.1 Ordinary Least Square (OLS) . 57 3.4.2 Cumulative Abnormal Return (CAR) . 59 3.5 Data Processing . 60 3.6 Data Analysis.61 3.6. 1 Impact of Malaysian General Election on KLCI and Sectoral. Indices . 61 3.6. 2 Significance Testing for Dummy Variable of Individual Index . in Equation (eq. 3.4.1) . 62 3.6. 3 Significance Testing for Cumulative Abnormal Return (CAR) . in Equation (eq. 3.4.3) . 6362 3.7 Adopted Assumptions.63 3.8 Conclusion . 64 CHAPTER 4: DATA ANALYSIS . 65 4.0 Introduction.65 4.1 Descriptive Statistics . 65 4.2 Results and Findings.69 4.3 Conclusion . 82 CHAPTER 5: DISCUSSION, CONCLUSION AND IMPLICATIONS.83 5.0 Introduction.83 5.1 Summary of Results and Findings.83 5.2 Discussions of Major Findings . 86 5.3 Implications of the Study.9090 5.3.1 For Investors.90 5.3.2 For Researchers . 91 Empirical Investigation of General Election on Stock Market: A Malaysian Case ix 5.4 Limitations of the Study . 92 5.4.1 Two General Elections . 92 5.4.2 Monday Effect.93 5.4.3 Market Volatility . 93 5.5 Recommendations for Future Research.94 5.5.1 Compare amongst General Elections in Malaysia . 94 5.5.2 Speed of Information Spreading . 95 5.5.3 Volatility Transmission . 96 5.6 Conclusion . 96 References.97 Appendices.115 Empirical Investigation of General Election on Stock Market: A Malaysian Case