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Partisan Shocks and Financial Markets: Evidence from Close National Elections†

Partisan Shocks and Financial Markets: Evidence from Close National Elections† AbstractThis paper estimates the effect of partisan electoral victories on stock and bond markets. We employ a regression-discontinuity-based event study in a sample of 758 worldwide post-1945 national elections, using existing data on parliamentary elections and newly collected data on presidential elections. Left-wing electoral victories cause significant and substantial short-term decreases in stock market valuations, while the response of sovereign bond markets is mostly muted. Stock market effects are stronger and more persistent in elections in which the left’s proposed economic policy is more radical and in developing economies. (JEL D72, G14, N20, N40, O16, O17) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Applied Economics American Economic Association

Partisan Shocks and Financial Markets: Evidence from Close National Elections†

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20190292
Publisher site
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Abstract

AbstractThis paper estimates the effect of partisan electoral victories on stock and bond markets. We employ a regression-discontinuity-based event study in a sample of 758 worldwide post-1945 national elections, using existing data on parliamentary elections and newly collected data on presidential elections. Left-wing electoral victories cause significant and substantial short-term decreases in stock market valuations, while the response of sovereign bond markets is mostly muted. Stock market effects are stronger and more persistent in elections in which the left’s proposed economic policy is more radical and in developing economies. (JEL D72, G14, N20, N40, O16, O17)

Journal

American Economic Journal Applied Economics – American Economic Association

Published: Oct 1, 2020

References