Financial Markets and Politics: The Pi era Effect on the Chilean Capital Market

The 2010 presidential election in Chile marked a change from the center-left coalition that governed the country for twenty years to a center-right coalition led by politician and businessman Sebastian Pinera. We study the effect that Pinera's presidential campaign had on the Chilean capital market. By using a panel of forty-nine companies during a period of thirteen months prior to the election, we find that there was a positive and significant effect on the capital market because of the expectation that Pinera would be elected president. That expectation continued throughout the entire presidential campaign.