The document analyzes the effect of domestic and foreign political events on stock prices in the US and London stock markets. It collected stock price data from NASDAQ and LSEG exchanges and adjusted for inflation and currency rates. Using statistical analysis like confidence intervals and t-tests, it found no statistically significant impacts of events like the 2008 and 2012 US elections, Greek financial crisis, or Scottish independence vote on either market. The UK market showed more volatility. Future work could analyze more recent elections with smaller event windows and expand to other global markets.

1. The Effect of Domestic and Foreign
Political Events on the US and
London Stock Markets
Wasif Ali
Michael Bechara
Priya Chandrashekar
Zhanpeng Ruan

2. Agenda
• Motivation & selected events
• Data collection and adjustment
• Approach and code
• Analysis results
• Conclusion
• Next steps

3. Motivation
• We have gone through a politically tumultuous
past few years
• Domestic and Foreign
• What impact does this have on our finances?
• Goal: Figure out how different domestic and
foreign political events impact two major
exchanges: NASDAQ and the London Stock
Exchange Group

4. Events
● 2008 Presidential Election
● 2012 Presidential Election
● 2016 Super Tuesday
● Greek Financial Crisis
● Scottish Independence 2014
● BREXIT

5. About the Data
● 30 stocks from NASDAQ and 30 stocks from LSEG
■ Concatenated each exchange into two separate data frames
• Adjusted for formatting (column names, file format etc)
• Converted these data frames into clean CSV files to be used for analysis
● Adjustment of units
■ Since we are using different market and timeframes, adjustments with the prices are needed
• Currency Rate
• Inflation Rate

6. Increasing trend in CPI shows important of inflation
Source: Federal Reserve Bank of St. Louis

7. Approach and Code
- Inflation rate: computed using Consumer Price Index (CPI)
- Currency exchange rate: extrapolate missing data
- Difference between pre-event and post-event average stock price
- Scatter plot of price difference
- Match-paired hypothesis test on price difference
- Confidence interval, p-value, etc.
- Bar graph of daily total volume

8. Results: no statistically significant impact on US market
- Relatively narrower confidence interval

9. Results: no statistically significant impact on UK market
- Relatively wider confidence interval, indicating more volatility

10. Trading volume shows no change in investing behavior
Example: 2008 Presidential Election

11. Example 1: Scottish Independence
US Market
- CI = [-9.78, 4.72]
- CI Width = 14.50
- T-value = -0.71
- P-value = 0.48
UK Market
- CI = [-163.18, 78.49]
- CI Width = 241.67
- T-value = -0.72
- P-value = 0.48

12. Effect on Marketplace Visualizations
US UK

13. Example 2: 2016 Super Tuesday
US Market
- CI = [-11.10,20.41]
- CI Width = 31.51
- T-value = 0.60
- P-value = 0.55
UK Market
- CI = [-101.07, 174.85]
- CI Width = 275.9231968
- T-value = 0.55
- P-value = 0.59

14. Effect on Marketplace Visualizations
US UK

15. Drawing Conclusions
• UK marketplace is relatively more
volatile than US
• Investors should not make rash
decisions
➢ Decrease dumping of stocks during a
politically tumultuous time
• The prospect of shorting stocks is only
viable within a very short window
➢ Timing is critical!

16. Next Step
- Testing smaller window
- Expanding sample size
- Test effect from 2016
Presidential elections
- Expanding to other global
markets