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Exploratory Analysis of Functional Principal Components to Observe the Absorption of Election Sentiments in the Indian Stock Market

Author

Listed:
  • Keshri, Abhinav
  • Sharma, Charu

Abstract

An election year is expected to be of high volatility and movement in the stock markets, reflecting the aspirations and expectations of the common people from the upcoming government. In this paper, we explore Functional Principal Component Analysis to show how a big event like the general elections affects the stock market in the country. We take the Indian general election years of 2009, 2014, and 2019 and demonstrate how the unique circumstances before the elections affect the absorption of election sentiments and how this method can be used to find and foresee the effect of other such events through a detailed analysis of eigenfunctions.

Suggested Citation

  • Keshri, Abhinav & Sharma, Charu, 2020. "Exploratory Analysis of Functional Principal Components to Observe the Absorption of Election Sentiments in the Indian Stock Market," MPRA Paper 122325, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122325
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    File URL: https://mpra.ub.uni-muenchen.de/122325/1/MPRA_paper_122325.pdf
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    More about this item

    Keywords

    PCA; FPCA; General elections effect; Functional Data Analysis;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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