The fifteenth general election: an unforeseen effect on the Malaysian stock market

The 15th General Election in Malaysia, held on November 19, 2022, has resulted in the sworn-in of Anwar Ibrahim as the tenth Prime Minister of Malaysia. After a turbulent 25 years, the leader of Pakatan Harapan (PH) finally secured support amidst the intense competition among the major coalitions. This news significantly causes a huge blow to the Malaysian stock market, reflecting the political turmoil and investors’ uncertainty. Therefore, this study aims to investigate the effect of this political election on the Malaysian stock market. Using the daily stock price data of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI) ranging from October 5, 2022, until January 5, 2022, this paper observes the existence of abnormal returns of the FBMKLCI and its constituents and measures the magnitude of the abnormal returns. This study uses Augmented Dickey-Fuller test to identify the stationary of the data and the Ordinary Least Squares (OLS) method to analyse the relationship between the election and the stock returns. The unit root test of the data displays that each variable is stationary at level form. Overall, findings show that the Malaysian stock market is not affected by the election, as the dummy variable showed an insignificant result on Election Day. Thirteen out of twenty-three constituents of FBMKLCI display a similar result. Contrary to that, the rest of them show a positive and significant result. This inferred that the Malaysian stock market is a semi-efficient market and is not negatively affected by the internal general election.