Does political uncertainty affect investment in the Ibex 35?

Authors

  • Beatriz García Costa Universidad Rey Juan Carlos
  • Laura García Costa
  • Raúl Gómez Martínez

DOI:

https://doi.org/10.32826/cude.v42i122.102

Keywords:

political uncertainty, economic uncertainty, financial markets, investment, risk aversion, Investor’s mood

Abstract

There are stock index intrinsic factors whose directly affect to Ibex 35 movements such as; interest rate, sociocultural factors, political, economic and financial factors. The aim of this paper is to analyze if political uncertainly can influence on Ibex 35 evolution.  Because of that, we made an econometric analysis using historical series of Ibex quotes and the different valuations collected in the barometer made by the Center for Sociological Research whose refer to the assessment of current political situation. The main conclusion of this study is political uncertainly affects to risk aversion level of investors and therefore, behavior of investors is not as rational as requires perfect market efficiency. It is concluded that the decision-making of investors is conditioned by investors mood which is affected by the political situation at the time they carry out the investment.

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Published

2019-09-30

Issue

Vol. 43 No. 122 (2020): Pages 105-242 (May - August 2020)

Section

Articles

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