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

Kerim Arin, Suzanna ElMassah, Kaplan Samuel and Nicola Spagnolo
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Kaplan Samuel: Facultad de Ciencias Económicas, Universidad Nacional de Córdoba, Córdoba, Argentina

Review of Economics, 2022, vol. 73, issue 3, 211-221

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.

Keywords: election; excess returns; surprises; volatility (search for similar items in EconPapers)
JEL-codes: G14 G15 P16 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/roe-2022-0039

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