EconPapers    
Economics at your fingertips  
 

Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction market analysis

John W. Goodell, Richard J. McGee and Frank McGroarty

Journal of Banking & Finance, 2020, vol. 110, issue C

Abstract: We examine the relationship between election uncertainty, economic policy uncertainty, and financial market uncertainty in a prediction-market analysis, covering seven US presidential election campaigns. We argue theoretically that changes in the incumbent party re-election probability should be a key driver of changes in policy uncertainty. Consistent with this theory, we find that a large portion of changes in financial uncertainty in the final stages of election campaign seasons is explained by changes in the probability of the incumbent party getting re-elected. Our findings suggest that the incumbent-party election probability, derived from prediction markets, is an important measure of economic policy uncertainty in the days leading up to US elections.

Keywords: Political uncertainty; Economic policy uncertainty; Financial uncertainty; Election uncertainty; Prediction markets (search for similar items in EconPapers)
JEL-codes: E65 G10 G13 G18 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426619302584
Full text for ScienceDirect subscribers only

Related works:
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: https://EconPapers.repec.org/RePEc:eee:jbfina:v:110:y:2020:i:c:s0378426619302584

DOI: 10.1016/j.jbankfin.2019.105684

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-06-30
Handle: RePEc:eee:jbfina:v:110:y:2020:i:c:s0378426619302584