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Trading and Voting

Author

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  • David K. Musto
  • Bilge Yilmaz

Abstract

Complete financial markets transform the political choice between candidates with different redistribution policies. If redistribution policies do not affect aggregate wealth, then financial trade implies that wealth considerations have no effect on voting and so do not affect who wins. However, an election in which one candidate would redistribute results in redistribution, and redistribution is the same whether or not he wins. Furthermore, he proposes, and if elected carries out, more redistribution than he prefers. If redistribution policies do affect aggregate wealth, then everybody expects more wealth if the candidate with the higher aggregate-wealth policy wins.

Suggested Citation

  • David K. Musto & Bilge Yilmaz, 2003. "Trading and Voting," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 990-1003, October.
    • Handle: RePEc:ucp:jpolec:v:111:y:2003:i:5:p:990-1003
    DOI: 10.1086/377086
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    References listed on IDEAS

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    Cited by:

    1. Olaru, Ioan & Zachariadis, Konstantinos, 2011. "Trading and voting in distressed firms," LSE Research Online Documents on Economics 119076, London School of Economics and Political Science, LSE Library.
    2. Andrea Mattozzi, 2010. "Policy Uncertainty, Electoral Securities, And Redistribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 45-71, February.
    3. Agustin Casas & Yarine Fawaz & Andre Trindade, 2016. "Surprise Me If You Can: The Influence Of Newspaper Endorsements In U.S. Presidential Elections," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1484-1498, July.
    4. Brav, Alon & Mathews, Richmond D., 2011. "Empty voting and the efficiency of corporate governance," Journal of Financial Economics, Elsevier, vol. 99(2), pages 289-307, February.
    5. Marco Ottaviani & Peter Norman Sørensen, 2015. "Price Reaction to Information with Heterogeneous Beliefs and Wealth Effects: Underreaction, Momentum, and Reversal," American Economic Review, American Economic Association, vol. 105(1), pages 1-34, January.
    6. Wang, Bo & Zhou, Zhen, 2023. "Informational feedback between voting and speculative trading," Games and Economic Behavior, Elsevier, vol. 138(C), pages 387-406.
    7. Ľuboš Pástor & Pietro Veronesi, 2021. "Inequality Aversion, Populism, and the Backlash against Globalization," Journal of Finance, American Finance Association, vol. 76(6), pages 2857-2906, December.
    8. Schadner, Wolfgang, 2022. "U.S. Politics from a multifractal perspective," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    9. Marco Ottaviani & Peter Norman Sørensen, 2009. "Aggregation of Information and Beliefs: Asset Pricing Lessons from Prediction Markets," Discussion Papers 09-14, University of Copenhagen. Department of Economics.
    10. Knight*, Brian, 2007. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 389-409, February.
    11. Doron Levit & Nadya Malenko & Ernst Maug, 2024. "Trading and Shareholder Democracy," Journal of Finance, American Finance Association, vol. 79(1), pages 257-304, February.
    12. John Goodell & Richard Bodey, 2012. "Price-earnings changes during US presidential election cycles: voter uncertainty and other determinants," Public Choice, Springer, vol. 150(3), pages 633-650, March.
    13. John G Powell & Meifen Qian & Jing Shi & Qiaoqiao Zhu, 2015. "Should stock market return forecasts be conditioned on politics?," Australian Journal of Management, Australian School of Business, vol. 40(4), pages 672-700, November.
    14. Michael M. Bechtel & Roland Füss, 2010. "Capitalizing on Partisan Politics? The Political Economy of Sector‐Specific Redistribution in Germany," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(2‐3), pages 203-235, March.
    15. Ilia Tsetlin, 2006. "A Method for Eliciting Utilities and its Application to Collective Choice," Theory and Decision, Springer, vol. 61(1), pages 51-62, August.

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