The Effects of Presidential Cycle on Stock Market Returns in Tehran Stock Exchange

Document Type : Research Paper


1 Assistant Prof. in Business Management, Islamic Azad University, Karaj, Iran

2 M.Sc. in Business Management (Finance), Islamic Azad University, Tehran, Iran

3 Ph.D. Student in Public Policy, University of Tehran, Iran

4 M.Sc. in Public Administration (Human Resource), Islamic Azad University, Tehran, Iran


This study examines the impact of four-year presidential cycle on the Stock Returns of listed companies in Tehran stock exchange. The study covers two periods of presidential elections between 2001 and 2009 during which the eighth and ninth cabinet rose to power in Islamic Republic of Iran. In order to identify the slightly relationships, we used ARCH, GARCH and EGARCH models. Finding shows that the growth of stock returns has reduced during the first year of presidency, increased in the second year and maximized in the third year. Finally it has reduced during the fourth year of presidency. Findings also show that the reduction in output growth in the first year of the presidency has been more than cut in its fourth year. To explain these differences we should consider the political structure and the way which candidates are selected for the presidency. This shows the need to develop models consistent with the characteristics of the political- financial system of Iran. Utilizing these models, Investors can make on time decisions to gain the maximum return on their investments.