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Recovering election winner probabilities from stock prices

Author

Listed:
  • Hanke, Michael
  • Stöckl, Sebastian
  • Weissensteiner, Alex

Abstract

After the 2020 U.S. presidential election, counting votes and calling states took more time than usual, particularly in battleground states. In the days following the election, winning probabilities changed frequently as new results were tabulated. Based on the sensitivity of stocks to changes in winning probabilities observed before the election, we show how the stock market’s assessment of the unobserved post-election winning probabilities can be backed out from stock prices. Our approach is based solely on publicly available data.

Suggested Citation

  • Hanke, Michael & Stöckl, Sebastian & Weissensteiner, Alex, 2022. "Recovering election winner probabilities from stock prices," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002038
    DOI: 10.1016/j.frl.2021.102122
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    References listed on IDEAS

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    More about this item

    Keywords

    Election winner probabilities; Political prediction markets; Election portfolios;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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