An Analysis of Political Changes on Nikkei 225 Stock Returns and Volatilities

Chin-Tsai Lin


Yi-Hsien Wang

This paper examines whether there exists the effect of party alternative on
Nikkei 225 stock behavior by the asymmetric GARCH model. The empirical
work finds that the transition of ruling party effect is not a crucial variable to Nikkei 225 returns and volatility. Japanese feel apathy and alienation about political environment result in the succession of prime ministers does not influence the Japanese stock market behavior. Therefore, resigned previous prime ministers have become scapegoats for the poor performance of financial and economic policies.

Key Words: Party alternative; Volatility asymmetry; Scapegoating; EGARCH.
JEL Classification Numbers: C20, G10.