Wojciech Grabowski

Department of Econometric Models and Forecasts,

University of Lodz,

Poland

wojciech.grabowski@uni.lodz.pl

ORCID 0000-0002-6707-3736

Illiberal turn and financial markets in Hungary and Poland

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.

Received: November, 2024

1st Revision: May, 2025

Accepted: September, 2025

DOI: 10.14254/2071-8330.2025/18-3/12

JEL Classification: G15, G40, P30

Keywords: democratic backsliding, stock market, high-frequency data