The Impact of Political Events - “Name Issue” on an Emerging Macedonian Stock Market

Abstract

The objective of the research is to investigate the impact of political events – “name issue” on the Macedonian Stock Exchange (MSE). Structural changes in volatility of Macedonian capital market seems to be more a consequence of political changes, especially from the perspective of international politics and the association of the country into NATO and the European Union.

The research analyzes the response of capital markets to political events. Such an event is the summit in Bucharest as the day D (03/04/2008) which certainly had an impact because of prolonged unresolved problem of the name imposed by Greece. Visa liberalization and the day of solving the status of candidate country for accession to the European Union will be discussed too. An event methodology is employed, and the results suggest that the market respond to all political events connected “name issue”. The results also indicate that there is no difference between the means of abnormal returns before and after the event.

Sensitivity of the Macedonian investor related to any information connected to the word "name" is enormous. The Macedonian investor belief is that if “name” issue would be solved, regardless of possible negative real economic flows stock exchange will increase. The paper provides information regarding the effects of solving this name issue on Macedonian investor, and his expectation on this issue. But even if it is solved, the global economic crises and difficult economic situation in Macedonia especially this situation will be temporary and due to low liquidity, foreigners may use local optimism to sell their shares.