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Presidential Election Uncertainty And Common Stock Returns In The United States

  • Jinliang Li
  • Jeffery A. Born

There is substantial evidence on the influence of political outcomes on the business cycle and stock market. We further hypothesize that uncertainty about the outcome of a U.S. presidential election should be reflected in pre-election common stock returns. Prior research pools returns based on the party of the winning candidate, assuming that the outcome of the election is known a priori. We use candidate preference (i.e., polling) data to construct a measure of election uncertainty. We find that if the election does not have a candidate with a dominant lead, stock market volatility (risk) and average returns rise. 2006 The Southern Finance Association and the Southwestern Finance Association.

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Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

Volume (Year): 29 (2006)
Issue (Month): 4 ()
Pages: 609-622

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Handle: RePEc:bla:jfnres:v:29:y:2006:i:4:p:609-622
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