The Effect of Speeches and Political Events on the Stock Market

Abstract

Fluctuation is an indispensable feature of the stock market. The trend of stock market can never be predicted accurately. There are innumerable factors that work simultaneously and influence the stock prices or cause movements in the stock market. It has been believed by the traditional economists that investors are rational and they invest in such securities where they expect to get higher profit at low risk.It has also been assumed that before investing in any security each and every investor does proper analysis and goes through the herculean task of fundamental and technical analysis of the securities. But this is not the complete picture. There is one dominating factor that plays decisive role in not only taking the investment decision but also affects the price movement of the stock market. It is known as Investors' behaviour. Investors do not always follow the theories of traditional economists before taking investment decisions. Sometimes they just follow other investors or any particular sentiment before investing their hard earned income. They also trust the words of their leaders or any such dominating personalities for assessing the future situation of market and position of their securities irrespective of the reality. They also get influenced by political events and become the easiest prey of their own presumptions about such events. This paper tries to find outthe effect of speeches by prominent personalities and political incidents on the investors' behaviour and its subsequent impact on the stock market fluctuation.Furthermore, the paperattempts to develop a conceptual framework to show the chain effect of such entwining incidents on the stock market. The research paper concludes that there exists a direct relationship between the speeches of dominating personalities and political events on the fluctuations in stock market, other factors remaining constant.