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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | The "Against Mass Immigration" Initiative and the Stock Market: An Event Study Analysis |
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| Language |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 32 |
| Date | 2014 |
| Abstract Text | Executive Summary On the 9th of February 2014, 50.3% of the Swiss population voted in favour of the “Against Mass Immigration” initiative. The aim of this Bachelor’s thesis is to investigate the reaction of the Swiss stock market to the announcement of this result and determine what impact this event had on quoted Swiss companies. How did the vote affect the value of Swiss firms? In order to answer this question, I conducted an event study analysis. This procedure is the most common instrument used in empirical capital market research to measure the impact of a new piece of information on stock prices. It allows the determination of whether the “Against Mass Immigration” initiative vote resulted in no news, good news, bad news or indefinable news for the Swiss stock exchange. In order to provide a better understanding of the context in which the event study is conducted, at the beginning of my thesis I mention the most important features of Switzerland’s “semi-direct democracy” and its legislation process. Additionally, I give an overview of the main demands in the initiative’s text. When the majority of the electorate accepts a popular initiative, an amendment to the Swiss Constitution is made and the Swiss Government is required to implement the new constitutional provisions. The Swiss People’s Party (Schweizerische Volkspartei, SVP) proposed the “Against Mass Immigration” popular initiative in order to redesign the Swiss immigration policy. The vote is very recent and it is still uncertain how the new constitutional articles might be implemented and what could be the concrete consequences for the country. This event can be defined as a market wide shock. In this environment of national and international political, social and economical implications of the “Against Mass Immigration” initiative, I look for significant evidence to assess if the event has created or destroyed value in the Swiss stock market. At the core of my thesis I outline the event study analysis. My aim is to analyse how the overall portfolio of all listed companies in the Swiss Performance Index (SPI) reacted to the event. Additionally, I want to determine whether or not the stock prices of companies with different features were affected in different manners by the event. Thus, I construct portfolios according to company characteristics, such as the size, the industry or the presence of the company in the Swiss market versus its international representation. When testing these portfolios separately, it is possible to conclude which have been the winners and which the losers. An event study is carried out in order to find significant evidence against the null hypothesis of no effect of the event on stock prices. To do so, the abnormal return of each stock in the sample is computed. The abnormal return is the difference between the actually observed return and the normal return, predicted for the case in which no event had taken place. I collected the data I needed from the Thomson Reuters Datastream database. I calculated normal returns over an estimation window of 250 trading days using the Market Model. Afterwards, I calculated abnormal returns for each company of the sample on each day of the event window, a time period of ±1 day around the event day. In order to test the reaction of different portfolios to the event, I aggregated abnormal returns accordingly. For these portfolios I implemented a parametric significance test. Since this thesis is about a regulatory event in a national market, the event day is the same for all securities and stock price responses are not perfectly independent within the sample. Thus, it is important to consider the presence of event-time clustering. In order to account for the bias caused by clustering, an extensive literature review has been performed. After having evaluated the evidence in favour of the adjusted Boehmer/Musumeci/Poulsen (1991) test statistic by Kolari/Pynnönen (2005/2010), I decide to implement this procedure, which accounts for clustering and event-induced variance. To conclude my thesis, I present the findings and their interpretation. When testing for an impact of the vote on the 9th of February 2014 on the overall sample of all SPI constituents, the null hypothesis of no effect cannot be refuted. The further analyses for portfolios constructed according to common characteristics of the firms do not display significant results either. To sum up, the lack of stock price reactions suggests that the event has been no news for the Swiss stock market. This is likely to be an indicator for the confidence of Swiss companies to support the possible consequences of the future implementation of the “Against Mass Immigration” initiative. |
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