 Electoral uncertainty and financial volatility: Evidence from two‐round presidential races in emerging marketsDaniel Carnahan and Sebastian Saiegh Economics and Politics, 2021, vol. 33, issue 1, 109-132 Abstract: We study how the predictability and the decisiveness of electoral outcomes affect financial volatility. We argue that traders’ optimal investment strategies depend on their ability to make accurate electoral forecasts and the prospective losses associated with placing a bet on the wrong candidate. Using a triple difference‐in‐difference approach and data from two‐round presidential elections in five Latin American countries between 1999 and 2018, we find that financial volatility is greatest in the days immediately following unpredictable, decisive, elections. Postelectoral volatility also occurs following predictable, indecisive elections. The effect of learning the identity of the winning candidate on financial volatility is null when the election is unpredictable and indecisive, as well as when the election is decisive, but the outcome is predictable. These findings offer insights into investors seeking to hedge price risk around elections. They also have important implications regarding the relationship between public opinion polls and postelectoral financial volatility. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:ecopol:v:33:y:2021:i:1:p:109-132 Ordering information: This journal article can be ordered from Access Statistics for this article Economics and Politics is currently edited by Peter Rosendorff More articles in Economics and Politics from Wiley Blackwell |
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