Stock Market Volatility around National Elections

Arbeitspapier

This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the countryspecific 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.

Show object

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper Series ; No. 2006,2

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Information and Market Efficiency; Event Studies; Insider Trading ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: Political risk ; National elections ; Stock market volatility

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bialkowski, Jedrzej ; Gottschalk, Katrin ; Wisniewski, Tomasz Piotr
• Event: Veröffentlichung
• (who): European University Viadrina, The Postgraduate Research Programme: Capital Markets and Finance in the Enlarged Europe
• (where): Frankfurt (Oder)
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/22109