The 2000 presidential election and the information cost of sensitive versus non-sensitive S&P 500 stocks
AbstractWe investigate the information cost of stock trading during the 2000 presidential election. We find that the uncertainty of the election induces information asymmetry of politically sensitive firms under the Bush/Gore platforms. The unusual delay in election results creates a significant increase in the adverse selection component of the trading cost of politically sensitive stocks. Cross-sectional variations in bid-ask spreads are significantly and positively related to changes in information cost, controlling for the effects of liquidity cost and stock characteristics. This empirical evidence is robust to different estimation methods.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Markets.
Volume (Year): 12 (2009)
Issue (Month): 1 (February)
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Web page: http://www.elsevier.com/locate/finmar
Presidential election Information asymmetry Transaction costs Bid-ask spreads Adverse selection cost;
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- Goodell, John W. & Vähämaa, Sami, 2013. "US presidential elections and implied volatility: The role of political uncertainty," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1108-1117.
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[Contradictory orders and detructive coordination: the Iranian disease]," MPRA Paper 13235, University Library of Munich, Germany, revised Sep 2008.
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