Connection between Politics and Stock Market Quality Explored
The link between politics and economics was explored during a lecture at UKZN by the Head of Banking and Finance in the Australian School of Business at the University of New South Wales in Sydney, Professor Jerry Parwada.
Parwada’s presentation to academics at the School of Accounting, Economics and Finance (SAEF), was titled: “Dominant Party Political Cycles and Stock Market Quality: Evidence from South Africa.”
Parwada was keen to gather ideas from the academics on how he could improve his research.
‘The paper I am delivering today is a work in progress that needs to be properly motivated that’s why I am here today. I can’t complete my motivation sitting in my office in Sydney; I need to get into an academic setting such as this one and get valuable input.’
The research uses South Africa’s political environment as a laboratory to examine the effect of dominant political party cycles on stock market quality and measures such as efficiency, integrity and systemic risk.
‘People have been trying to study the discipline of politics and finance but the majority of literature today concentrates on the correlation of market characteristics and economic fundamentals,’ said Parwada.
‘The study’s preliminary results find evidence consistent with the hypothesis that political uncertainty in such a context has negative effects on market quality. However, this effect is reduced by the level of political plurality that exists in SA at the provincial level.’
SAEF academics responded to Parwada’s request for suggestions on how to strengthen his research, giving feedback on how he could extend his analysis by including the aspect of changes in government ministers, exploring political associations and looking into counterfactual challenges.
Parwada acknowledged contributions from the academics and said he would use some of the input when he presented his paper at the 6th Annual African Finance Conference in Ghana later this month.
During his visit to UKZN, Parwada also delivered a lecture titled: “Low interest rate environment in developed countries poses challenges to asset allocation strategies of portfolio managers to MBA students”. The lecture reviewed the global economic climate with particular emphasis on changing interest rates in developed countries and South Africa.