Electioneering activities and their impact on the Ghana Stock Exchange

Résumé

Orientation: Literature is scanty on the euphoria around Ghana’s electioneering activities and their impact on economic activities. Research purpose: This paper studies electioneering activities and their impact on the Ghana Stock Exchange (GSE) returns. Motivation for the study: Literature have established that political risk is statistically significant in emerging stock markets and from 5 January to 7 December 2016, the GSE lost 23.47% of its trading values. Hence, this paper finds it imperative to examine whether electioneering activities indeed have an impact on GSE. Research approach/design and method: Using daily data span from 5 January 2016 to 7 December, 2016. The autoregressive distributed lag (ARDL) bound test approach to cointegration and Granger causality test was used to examine the data. Main findings: The result suggests that electioneering activity impact negatively on the GSE returns both in the short-run and long-run, but its cause is not clear. It impacts creates arbitrage opportunities for investors and may punish the political party in power. Practical/managerial implications: Political parties in power should recognize that electioneering activities creates a dilemma between regaining power or managing the economy. Contribution/value-add: Ghana’s electioneering activities disproves some investment theories, that is, investors assume risk may not reflect their expected return since the stock market efficiency is nullified by arbitrage opportunity.

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