The effect of political instability in the international stock markets: the case of Greece

Abstract

This study examines the relationship between political instability and stock market volatility, having used daily time series data from the period of July 2014 to March 2016. Τhe term stock market volatility refers to the impact of political events on the general indicators of 8 European countries as well as on some sectoral indicators of Germany. Meanwhile, three different political instability events are used in order to measure the political uncertainty. Furthermore, the empirical part utilizes the Event Study Methodology. The findings indicate a negative effect on the general indicators in the short run. The research contributes to literature by providing empirical evidence to policy makers on the effects that political instability has on stock markets.