Do political factors affect stock returns during presidential elections?

Chung Hua Shen, Dien Giau Bui, Chih-Yung Lin*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


This study investigates whether or not political factors such as government policy and political connections affected stock returns during the 2008 Taiwanese presidential election. We find that firms that benefitted from (were threatened by) the proposed Three-Links policy of the winning party experienced positive (negative) stock returns during the election. We use the sensitivities of firms’ returns to bilateral trade flows between Taiwan and China to measure the government-policy effect. Our results show that the effects of political connections weakly exist, but they become more significant when the support ratio of the winning party increased in polling data. We also find that only the government-policy effect holds for different crash-risk and corporate-governance levels. Finally, investment strategies based on both political factors can generate positive abnormal returns with respect to the Fama-French Three-factor Model.

Original languageEnglish
Pages (from-to)180-198
Number of pages19
JournalJournal of International Money and Finance
StatePublished - 1 Oct 2017


  • Government policy
  • Political connections
  • Polling data
  • Stock returns
  • Zero-cost portfolio


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