Effects of intra-state political protests on stock returns in emerging market economies: An empirical study of stock markets in Brazil, Thailand, and Turkey

Abstract: This empirical study investigates the effects of intra-state protests and political uncertainty on stock returns in Brazil, Thailand, and Turkey by analyzing three large-scale events between 2013 and 2014. Although distinct by nature, the studied events combine common characteristics as they turned from a single catalyst event into mass protests that targeted several aspects of public discontent. We study cumulative abnormal returns (CARs) by separating the events into five distinct event windows, and conduct empirical analyses on both market level and firm level. We find significant negative CARs for Brazil and Turkey, which increase in magnitude as protests become larger and violent, and we also find a significant reversal effect once the protests stop. In Thailand, we find inconclusive results as significant positive CARs occur during the main period of protests. Through OLS regressions on a market level, we identify a link between protest size and abnormal returns only for the Turkish market. On a firm level, we find that ex ante trading volume and volatility have a significant explanatory effect for negative CARs during protest periods, and we also find support for explanatory links between government ownership and negative abnormal returns. Our study contributes to existing literature and broadens the understanding of political protests in emerging markets. Furthermore, the study's findings provide valuable insight for the investment community for future political protests.