Illiberal turn and stock markets in Hungary and Poland
Illiberal turn and stock markets in Hungary and Poland

Summary/Abstract: This paper investigates the impact of news releases concerning decisions of populist politicians on stock markets in Hungary and Poland. The results of the empirical analysis provide solid evidence regarding the impact of populist decisions and manifestos on the attitudes of investors on financial markets. It has been demonstrated that the reaction of financial markets to democratic backsliding is not always negative. The impact of news releases on stock market returns varies across countries and over time. The strongest reactions from the stock markets in Budapest and Warsaw were recorded in response to the negative news releases on funding cuts and conflicts between these countries and the European Union institutions. Furthermore, the negative performance of the Hungarian and Polish stock market shorts after the Russian invasion of Ukraine confirmed the important role of geopolitical risk.

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