Stock market volatiltity around national elections

Jedrzej Pawel Bialkowski, Katrin Gottschalk () and Tomasz Wisniewski

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Political risk; National elections; Stock market volatility (search for similar items in EconPapers)
JEL-codes: G12 G14 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-cfn, nep-pbe, nep-pol and nep-rmg
Date: 2006-01, Revised 2006-11
View list of references View citations in EconPapers

Downloads: (external link)
http://mpra.ub.uni-muenchen.de/302/

Related works:
Journal Article: Stock market volatility around national elections (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:302

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany
Address: Schackstr. 4, D-80539 Munich, Germany
Contact information at EDIRC.
Series data maintained by Ekkehart Schlicht ().