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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 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-

Language: English-

Keywords: Political risk; National elections; Stock market volatility-

Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest RatesG - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider TradingG - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions-





Autor: Bialkowski, Jedrzej

Fuente: https://mpra.ub.uni-muenchen.de/302/







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