This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Stock market volatiltity around national elections

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Bialkowski, Jedrzej
Gottschalk, Katrin
Wisniewski, Tomasz

Additional information is available for the following registered author(s):

Abstract

This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an Election Day, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/302/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 302.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jan 2006
Date of revision: Nov 2006
Handle: RePEc:pra:mprapa:302

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: Political risk; National elections; Stock market volatility;

Other versions of this item:

Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March. [Downloadable!] (restricted)
  2. Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-61, December. [Downloadable!] (restricted)
  3. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Blackwell Publishing, vol. 42(2), pages 169-90, April. [Downloadable!] (restricted)
  4. Gartner, Manfred & Wellershoff, Klaus W., 1995. "Is there an election cycle in American stock returns?," International Review of Economics & Finance, Elsevier, vol. 4(4), pages 387-410. [Downloadable!] (restricted)
  5. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December. [Downloadable!] (restricted)
  6. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Fair, Ray C, 1978. "The Effect of Economic Events on Votes for President," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 159-73, May. [Downloadable!] (restricted)
    Other versions:
  8. Grier, Kevin B & McGarrity, Joseph P, 1998. "The Effect of Macroeconomic Fluctuations on the Electoral Fortunes of House Incumbents," Journal of Law & Economics, University of Chicago Press, vol. 41(1), pages 143-61, April.
  9. Pedro Santa-Clara & Rossen Valkanov, 2003. "The Presidential Puzzle: Political Cycles and the Stock Market," Journal of Finance, American Finance Association, vol. 58(5), pages 1841-1872, October. [Downloadable!] (restricted)
  10. Beetsma, Roel M W J & Schotman, Peter C, 2001. "Measuring Risk Attitudes in a Natural Experiment: Data from the Television Game Show Lingo," Economic Journal, Royal Economic Society, vol. 111(474), pages 821-48, October. [Downloadable!] (restricted)
    Other versions:
  11. Cargill, Thomas F & Hutchison, Michael M, 1991. "Political Business Cycles with Endogenous Election Timing: Evidence from Japan," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 733-39, November. [Downloadable!] (restricted)
  12. Riley, William B. & Luksetich, William A., 1980. "The Market Prefers Republicans: Myth or Reality," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(03), pages 541-560, September. [Downloadable!]
  13. Dubofsky, David A, 1991. " Volatility Increases Subsequent to NYSE and AMEX Stock Splits," Journal of Finance, American Finance Association, vol. 46(1), pages 421-31, March. [Downloadable!] (restricted)
  14. Forsythe, Robert & Rietz, Thomas A. & Ross, Thomas W., 1999. "Wishes, expectations and actions: a survey on price formation in election stock markets," Journal of Economic Behavior & Organization, Elsevier, vol. 39(1), pages 83-110, May. [Downloadable!] (restricted)
  15. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank. [Downloadable!]
  16. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-80, March. [Downloadable!] (restricted)
    Other versions:
  17. Soosung Hwang & Pedro Valls Pereira, 2006. "Small sample properties of GARCH estimates and persistence," European Journal of Finance, Taylor and Francis Journals, vol. 12(6-7), pages 473-494, October. [Downloadable!] (restricted)
    Other versions:
  18. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December. [Downloadable!] (restricted)
  20. Alesina, Alberto & Roubini, Nouriel, 1992. "Political Cycles in OECD Economies," Review of Economic Studies, Blackwell Publishing, vol. 59(4), pages 663-88, October. [Downloadable!] (restricted)
    Other versions:
  21. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
  22. Booth, James R. & Booth, Lena Chua, 2003. "Is presidential cycle in security returns merely a reflection of business conditions?," Review of Financial Economics, Elsevier, vol. 12(2), pages 131-159. [Downloadable!] (restricted)
  23. Jimmy E. Hilliard & Robert Savickas, 2002. "On the Statistical Significance of Event Effects on Unsystematic Volatility," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 25(4), pages 447-462. [Downloadable!] (restricted)
  24. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August. [Downloadable!] (restricted)
  25. Fair, Ray C, 1996. "Econometrics and Presidential Elections," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 89-102, Summer. [Downloadable!] (restricted)
  26. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I. [Downloadable!] (restricted)
  27. Matthew C. Clayton & Jay C. Hartzell & Joshua Rosenberg, 2005. "The Impact of CEO Turnover on Equity Volatility," Journal of Business, University of Chicago Press, vol. 78(5), pages 1779-1808, September. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Boutchkov, Maria & Doshi, Hitesh & Durnev, Art & Molchanov, Alexander, 2008. "Politics and Volatility," CEI Working Paper Series 2008-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can create your own reading lists on IDEAS.

This page was last updated on 2009-12-9.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.