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Stock market volatility around national elections

Białkowski, Jędrzej; Gottschalk, Katrin and Wisniewski, Tomasz Piotr (2008). Stock market volatility around national elections. Journal of Banking and Finance, 32(9) pp. 1941–1953.

DOI (Digital Object Identifier) Link: https://doi.org/10.1016/j.jbankfin.2007.12.021
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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.

Item Type: Journal Item
Copyright Holders: 2008 Elsevier B.V.
ISSN: 0378-4266
Keywords: political risk; national elections; stock market volatility
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 55392
Depositing User: Tomasz Wisniewski
Date Deposited: 12 Jun 2018 10:08
Last Modified: 09 Dec 2018 06:05
URI: http://oro.open.ac.uk/id/eprint/55392
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