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Elections and Political Risk: New Evidence from Political Prediction Markets in Taiwan


  • Masami Imai

    () (Department of Economics, Wesleyan University)

  • Cameron A. Shelton

    () (Robert Day School of Economics and Finance, Claremont McKenna College)


We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the “One China Principle”. We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.

Suggested Citation

  • Masami Imai & Cameron A. Shelton, 2010. "Elections and Political Risk: New Evidence from Political Prediction Markets in Taiwan," Wesleyan Economics Working Papers 2010-001, Wesleyan University, Department of Economics.
  • Handle: RePEc:wes:weswpa:2010-001

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    References listed on IDEAS

    1. 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.
    2. repec:reg:rpubli:259 is not listed on IDEAS
    3. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 807-829.
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    8. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2007. "Party Influence in Congress and the Economy," Quarterly Journal of Political Science, now publishers, vol. 2(3), pages 277-286, August.
    9. Roland Füss & Michael Bechtel, 2008. "Partisan politics and stock market performance: The effect of expected government partisanship on stock returns in the 2002 German federal election," Public Choice, Springer, vol. 135(3), pages 131-150, June.
    10. Paul Rhode & Koleman Strumpf, 2006. "Manipulating political stock markets: A field experiment and a century of observational data," Natural Field Experiments 00325, The Field Experiments Website.
    11. Witold Jerzy Henisz, 2004. "Political Institutions and Policy Volatility," Economics and Politics, Wiley Blackwell, vol. 16(1), pages 1-27, March.
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    14. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
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    Cited by:

    1. Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2013. "Political Connections and Firm Value: Evidence from the Regression Discontinuity Design of Close Gubernatorial Elections," Sciences Po publications 15, Sciences Po.
    2. Quoc-Anh Do & Bang Dang Nguyen & Yen-Teik Lee & Kieu-Trang Nguyen, 2011. "Out of Sight, Out of Mind:The Value of Political Connections in Social Networks," Working Papers 19-2011, Singapore Management University, School of Economics.

    More about this item


    Partisan Effects; Taiwan;

    JEL classification:

    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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