Bialkowski, Jedrzej and Gottschalk, Katrin and Wisniewski, Tomasz (2006): Stock market volatiltity around national elections.
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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 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.
|Item Type:||MPRA Paper|
|Original Title:||Stock market volatiltity around national elections|
|Keywords:||Political risk; National elections; Stock market volatility|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
|Depositing User:||Katrin Gottschalk|
|Date Deposited:||05. Nov 2006|
|Last Modified:||21. Feb 2013 03:29|
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