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Title: Stock market volatility around national elections
Authors: Białkowski, Jędrzej
Gottschalk, Katrin
Wisniewski, Tomasz Piotr
First Published: Sep-2008
Publisher: Elsevier
Citation: Journal of Banking & Finance, 2008, 32 (9), pp. 1941-1953.
Abstract: This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an election, 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 government with parliamentary majority significantly contribute to the magnitude of the election shock. Furthermore, some evidence is found that markets with short trading history exhibit stronger reaction. Our findings have important implications for the optimal strategies of institutional and individual investors who have direct or indirect exposure to volatility risk.
DOI Link: 10.1016/j.jbankfin.2007.12.021
ISSN: 0378-4266
Type: Article
Rights: This paper was published as Journal of Banking & Finance, 2008, 32 (9), pp. 1941-1953. It is available from DOI: 10.1016/j.jbankfin.2007.12.021
Appears in Collections:Published Articles, School of Management

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