Presidential elections and stock return volatility: evidence from selected sub-Saharan African stock markets

Abstract

Purpose

This paper aims to investigate the effect of presidential elections on stock return volatility in five leading stock markets in sub-Saharan Africa.

Design/methodology/approach

This paper uses various criteria to select an appropriate generalized autoregressive conditional heteroscedasticity model to estimate the second moment of the return distribution with the inclusion of pre- and post-presidential election dummy variables that capture the effect of presidential elections on stock market volatility.

Findings

The empirical results show that high pre-election uncertainty increases volatility in the Nairobi Stock Exchange, Stock Exchange of Mauritius and the Nigeria Stock Exchange. Furthermore, the results show that volatility in stock return is reduced 90 days after an election in Nigeria and South Africa but increases 90 days after elections in Ghana.

Originality/value

Contrary to the previous studies that are conducted in a single country with focus on specific elections, this paper provides a comparative analysis of presidential elections and stock return volatility in five leading stock markets in sub-Saharan Africa.

Citation

Musah, G., Domeher, D. and Musah, A. (2023), "Presidential elections and stock return volatility: evidence from selected sub-Saharan African stock markets", Journal of Financial Economic Policy, Vol. 15 No. 3, pp. 248-262. https://doi.org/10.1108/JFEP-02-2023-0033