USING EVENT STUDY ANALYSIS TO DETERMINE THE INFLUENCE OF DONALD TRUMP’S ELECTION RESULTS ON FINANCIAL SECTOR

The event study methodology was applied in this paper in order to determine the effects of the results of the presidential elections in the United States of America on financial sector companies. The analysis focused on three election cycles in which Donald Trump participated as the candidate of the Republican Party. The goal was to determine whether the election results led to the creation of an abnormal return and, if so, what was its sign. The assumption is that the sign of the abnormal return will depend on the outcome of the election, because in general the Republican Party is perceived as the protector of big business, primarily due to the practice of relaxing regulatory and tax solutions in various areas. The research showed that the financial sector reacts to the outcome of the presidential elections and that the reaction is consistent through different election cycles. Republican candidate victories produced a positive abnormal return in the financial sector, while Democratic candidate victory produced a negative abnormal return. All tests confirm the existence of statistically significant returns in the post-election period. In the period before the elections, the situation is somewhat different, because the tests do not always succeed in confirming the statistical significance of abnormal returns. The general trend in the part of the period of events before the election day itself depends on the exit polls, that is, on the rational expectations of the market, so even in that case, a positive return is recorded when the polls give a bigger chance to the Republican candidate, that is, a negative return is present when the polls favour the Democratic candidate.