This study delves into the short-term Indian stock market responses to the 2024 US presidential election results. Additionally, it examines how these impacts are scattered across different economic sectors.
This study adopts the event study method with the market model to estimate normal returns. It uses a 252-day estimation window (−254, −3) and a five-day event window (−2, +2). This study uses both parametric and non-parametric test statistics for hypothesis testing. The sample includes 1,877 stocks listed on India’s National Stock Exchange (NSE). For robustness check, we use the (1) Fama–French three-factor model, generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH for estimating normal returns and (2) Boehmer, Musumeci and Poulsen test, Patell test and the Corrado test for testing the significance.
The findings suggest that (1) the NSE-listed stocks are positively affected by the election outcome, (2) none of the economic sectors are adversely affected (3) the academic and education services sector is insignificant, (4) the energy, utilities and the financial sectors are the least affected, (5) the basic materials, consumer non-cyclicals and technology sectors experience most positive effects, followed by consumer cyclicals, healthcare, industrials and real estate sectors, (6) the positive market responses do not continue for long, as the market adjusts with the other con-current events. Results are robust to various estimation models and significance tests.
The findings imply that external political events distinctly impact sectors and suggest opportunities for sector-focused investment strategies around elections. Future research could examine policy drivers behind sectoral sensitivity and guide policies that strengthen their responsiveness to political changes and market stability.
This study contributes to the existing literature on the economic effects of global political events. This study is the first to comprehensively examine the effects of the US presidential election on 1,877 stocks from 11 economic sectors in India.
