1. Discussion of the paper What Do European Stock Markets Prefer
Discussion of the paper What Do European Stock Markets Prefer? Left or Right Governments
by Andreea Stoian and Delia Tatu
Discussant
Vítor Castro
Fac. Economics, Univ. Coimbra, Portugal
INFER Annual Conference 2012
10-13 May 2012

2. General Overview: Aims and Findings
Analyse whether government partisanship influences European stock markets return.
Data (monthly & quarterly: Jan.2000–Dec.2010):
15 advanced economies
9 emerging economies
Evidence:
In advanced economies, stock markets perform better under right-wing governments;
No significant evidence for emerging economies.

3. Comments Appealing and motivating review of the literature.
It could be more clearly divided in effects of the political cycle and partisan effects on the stock market returns.
Arin et al. (2011) conclude that the effects of other political variables are stronger than left/right effects.
Investors may focus on ECB actions (interest rate) rather than on election outcomes.
Consider the effect of political instability on returns.
The growth cycle could be obtained with Markov-switching approach instead of the HP filter (=> end-point bias).

4. Questions Why not try an analysis for a longer period?
Other factors missing: “We may assume that are other driving forces that affect it and that we did not take into account for the current study.” Why not? It seems the analysis is incomplete.
Why political cycle (elections), instability, fragmentation and monetary variables (interest rate) are not considered?
Why do you employ a dummy to control for the economic performance instead of GDP growth? Moreover, it is never statistically significant!
Panel: Why random effects? Hausman test? Dynamic?
Not clear why high inflation and debt with right in CEE.