Votes, Stocks, Gold and Wheat: A Comparative Analysis of the Volatility Shocks in the Stock, Gold and Wheat Markets during the 2014 General Elections in India

Abstract

This thesis is a comparative examination of volatility shocks in the stock, gold and wheat markets during the 2014 general elections in India. The economic impact on the lives of Indians can be described in a variety of ways; therefore, it is important to consider the impact of the elections on the stock market, the commodity market for gold and the market for wheat because each of these capture a different facet of economic impact. The stock market demonstrates the overall economic health and the growth potential involving factors such as better jobs and higher salaries for Indians. The market for gold directly indicates the impact on the wealth of Indians since most households own gold and consider it as a safe asset. The market for food staples such as wheat reflects the day-to-day lifestyle changes of Indians due to change in affordability of a household staple food. This thesis identifies volatility shocks in the Indian stock, gold and wheat markets during the 2014 general elections using the Iterated Cumulative Sum-of-Squares (ICSS) algorithm on new data from the 2014 Indian general election and on new markets involving gold and wheat. It develops and uses metrics to quantitatively analyze the nature and behavior of these volatility shocks and to compare these behaviors between the three markets considered. Furthermore, extensive news based research is conducted to aggregate and associate each of the volatility shocks with potentially relevant events. Lastly, the nature of volatility shocks and their association with events during the 2014 general elections in India are compared to results from the 2009 general elections in India and the 2012 United States presidential elections to analyze whether this behavior is specific to elections, Indian elections or only to this one case of the 2014 Indian general elections. By analyzing these volatility shocks and associated events from the news, this thesis identifies some key similarities and differences between the stock, gold and wheat markets during elections.