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Politics, stock markets, and model uncertainty

Author

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  • K. Arin

    ()

  • Alexander Molchanov

    ()

  • Otto Reich

    ()

Abstract

The available evidence on the effects of political variables on both returns and volatility of aggregate stock indices is scant and mixed. Applying Bayesian Model Averaging to a panel dataset of 17 parliamentary democracies spanning the post-war period until 1995, we test the robustness of political variables in explaining stock returns and stock return volatility. While we find that the influence of political variables on excess returns is weak, there is evidence of some political variables explaining return volatility. Copyright Springer-Verlag 2013

Suggested Citation

  • K. Arin & Alexander Molchanov & Otto Reich, 2013. "Politics, stock markets, and model uncertainty," Empirical Economics, Springer, vol. 45(1), pages 23-38, August.
  • Handle: RePEc:spr:empeco:v:45:y:2013:i:1:p:23-38
    DOI: 10.1007/s00181-012-0601-5
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    References listed on IDEAS

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    Cited by:

    1. Julia Darby & Graeme Roy, 2017. "Political uncertainty and stock market volatility: new evidence from the 2014 Scottish Independence Referendum," Working Papers 1706, University of Strathclyde Business School, Department of Economics.
    2. repec:jfr:ijfr11:v:8:y:2017:i:4:p:184-195 is not listed on IDEAS

    More about this item

    Keywords

    Panel BMA; Excess returns; Stock market volatility; C11; G11; G12;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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