Return Volatility Around National Elections: Evidence from India

This paper analyses the share price performance around National elections in India during the 2014 general elections. Due to change in the market sentiment, the stock prices react to the changes in the government. We investigate shareholders’ returns around national elections for 30 companies of BSE SENSEX. Stock prices have been observed over different event windows like (-15, +15), (-2, +2), (-15, -2), (+2, +15) days around the event date. Event study methodology has been used to analyze the results. High positive CAAR (cumulative average abnormal returns) has been observed over different event windows, which reflect market has positively reacted to the possibility of a change in government and after election of a new government.