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October 5, 2025

Political uncertainty and stock market volatility: A comparative analysis of presidential elections in sub-ASEAN markets

Key Points

Increased political uncertainty before elections significantly raises stock market volatility across four countries.
Stock volatility persists for up to 90 days post-election, driven by investors' uncertainty about government policies.
The study utilizes a GARCH model, incorporating pre- and post-election variables to analyze market changes.
This research provides insights into regional election effects on stock market behaviour, unlike previous country-specific studies.

Abstract

This paper examines the impact of presidential elections on stock return volatility in four selected Sub-South East Asian stock markets: Indonesia, Malaysia, Thailand, and the Philippines. Using a generalised autoregressive conditional heteroscedasticity (GARCH) model, this study incorporates pre- and post-election dummy variables to assess the effect of presidential elections on market volatility. The findings reveal that heightened uncertainty before the elections significantly increases stock market volatility across all four countries. Additionally, the study highlights that investors' limited understanding of post-election government policies further drives market volatility for up to 90 days after the election. In contrast to previous research focused on individual leading countries, this paper offers a comparative analysis of countries with similar political and economic conditions, providing new insights into the broader regional effects of elections on stock market behaviour.

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