MARKET REACTION TO THE 2018 PRESIDENTIAL ELECTIONS: AN EVENTS STUDY IN PUBICLY TRADED FINANCIAL INSTITUTIONS

Abstract

The market efficiency hypothesis defines that stock prices reflect all available market information, which may be strong, semi-strong or weak depending on investors' actual access to information (FAMA, 1970). Thus, the present study aimed to test the market-efficiency hypothesis of the four largest publicly traded listed financial institutions in the Brazilian stock market in view of the victory of the PSL candidate Jair Bolsonaro in the Brazilian elections of 2018. In this way, the stocks of Banco do Brasil S.A, Itaú Unibanco S.A, Bradesco S. A. and Banco Santander do Brasil S.A. were analyzed based on the methodology of events study aiming to test market efficiency, identify the returns correlation between the mixed capital and private capital financial institutions and continue the work developed by Santos et al. (2017). As a result, it was observed that the null hypothesis that the market presented itself in the semi-strong form was rejected, since abnormal returns were statistically significant in the whole window of events. Moreover, the returns of the private and the mixed capital institutions did not show any kind of correlation.