stat 3250 final - group 2.pptx
TRANSCRIPT
The Effect of Domestic and Foreign Political
Events on the US and London Stock Markets
Wasif AliMichael Bechara
Priya ChandrashekarZhanpeng Ruan
Agenda• Motivation & selected events• Data collection and adjustment• Approach and code• Analysis results• Conclusion• Next steps
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
Events● 2008 Presidential Election
● 2012 Presidential Election
● 2016 Super Tuesday
● Greek Financial Crisis
● Scottish Independence 2014
● BREXIT
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
Increasing trend in CPI shows important of inflation
Source: Federal Reserve Bank of St. Louis
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
Results: no statistically significant impact on US market
- Relatively narrower confidence interval
Results: no statistically significant impact on UK market
- Relatively wider confidence interval, indicating more volatility
Trading volume shows no change in investing behaviorExample: 2008 Presidential Election
Example 1: Scottish IndependenceUS 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
Effect on Marketplace Visualizations
US UK
Example 2: 2016 Super TuesdayUS 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
Effect on Marketplace Visualizations
US UK
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!
Next Step- Testing smaller window- Expanding sample size- Test effect from 2016
Presidential elections- Expanding to other
global markets