Price of a Surprise: The Effects of Election Outcomes on Stock Market Returns and Volatility

Document Type

Article

Source of Publication

Review of Economics

Publication Date

12-2-2022

Abstract

Abstract By utilizing a novel data set of 24 democracies for the 1972–2018 period, we investigate how election outcomes, including election surprises, are priced by the stock market. We show that an election surprise increases volatility but has no significant effect on excess returns. A win by a coalition announced prior to the election decreases volatility, however, a large winning percentage for the lead party within the coalition decreases excess returns. An unexpected winning margin over the closest competitor by the lead party decreases volatility by consolidating power, but only in parliamentary elections. Party orientation for the winning party affects neither excess returns nor volatility, even if it is unexpected.

ISSN

0075-035x

Publisher

Walter de Gruyter GmbH

Volume

73

Issue

3

First Page

211

Last Page

221

Disciplines

Business

Keywords

election, excess returns, surprises, volatility

Indexed in Scopus

no

Open Access

no

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