Does political crisis impact the capital market returns in Bangladesh?

Published Online: 17 December, 2023 || Published in Print: 25 December, 2023

Abstract

The study is a comprehensive analysis on nineteen key political events that took place in the duration between January, 2005 to November, 2023. This study incorporates the events that are solely political in nature. The study uses Cumulative Abnormal Returns (CARs) that was calculated from capital market abnormal returns. For checking the robustness of the study, the study included two dimensions; one is the DSEX Index and the other is the criteria-based constructed portfolio. Also, for understanding lag values impact and sensitivity level of the impact of political events on capital market returns, five days impact horizon and fifteen days impact horizon have been separately analyzed. The statistical results found in small span horizon that political events’ impact is less sensitive to capital market returns. On the other hand, it is also found that political events’ impact is highly sensitive to capital market returns in long span horizon. Basing on the test of hypothesis, it is clear that there exists significant relation between political events and capital market returns in Bangladesh.