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This paper examines the congressional effect between the pre- and post-democratization on the stock market by the asymmetric Generalized Autoregressive Conditional Heterosce desticity (GARCH) model in the period 1984–2004. The results found that the congressional effect is negative effect on stock returns but volatility is not significant. However, the democratic effect on stock returns is negative and increased of volatility. Moreover, the congressional effect on stock market returns following democratization significantly exceeds that before democratization, but have no significant effect for the volatility in the same circumstances. These results provide evidences consistent with the contention of liberalization (Hayek, Am. Econ. Rev. 35, 519–530, Individualism and Economic order, The university of Chicago press, Chicago, London, 1945, 1948; Popper, The open society and its Enemies, Princeton …