Stock market reaction to the French snap legislative election

This paper provides the first empirical evidence of the French stock market reaction to the recent French snap legislative election amid growing concern about the rise of the Far Right in France. Using the Difference-in-Differences method, we analyze daily stock returns for a sample of French and other European firms listed in the STOXX Europe 600 Index from 11 January 2024 to 16 July 2024 and document negative stock market reactions surrounding the unexpected announcement of the legislative election. Specifically, we observe a 0.054% reduction in stock market returns for French firms, compared with other European firms unaffected by these snap elections. This negative reaction persisted irrespective of the election rounds, albeit with a slight improvement in the second round following improved investor sentiment occasioned by lower results for the Far Right than those predicted in the polls. Further sectoral analysis reveals that the negative impact of the election was evident in most sectors, except for the utility sector. Overall, we provide robust evidence of the significant negative impact of the snap legislative election on French stock returns. We discuss the implications of these findings for investors and policymakers.