Opinion polls and the stock market: evidence from the 2008 US presidential election

Ejara, Demissew Diro; Nag, Raja; Upadhyaya, Kamal P.

doi:10.1080/09603107.2011.617692

Cited by 10 publications

(11 citation statements)

References 13 publications

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“…Second, a victory of a Democratic candidate rather negatively influences stock returns both before and after the election, while we find mixed results around the victory of a Republican candidate. These findings do not confirm the presidential described by Santa-Clara and Valkanov (2003) for entire presidential terms, but they are largely consistent with the finding of Ejara et al (2012) for the market reaction to pre-election polls during the 2008 campaigning period.…”

Section: Discussioncontrasting

confidence: 77%

“…Wolfers and Zitzewitz (2004) document – based on evidence from prediction markets – that market mechanisms are likewise efficient at reflecting the political reality and quite accurate when predicting probabilities. When analyzing the stock market reaction to pre‐election opinion polls in the 2008 presidential election Ejara et al (2012) find that the stock market reacts more negatively when the Democratic candidate (Barack Obama) has a poll advantage over the Republican candidate (John McCain) than when the Republican candidate has an advantage over the Democratic candidate. In addition, they argue that the election result was no surprise since the polls already indicate the victory of Barack Obama.…”

Section: Literature Reviewmentioning

confidence: 99%

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Effects of election results on stock price performance: evidence from 1980 to 2008

2013

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The authors aim to analyze whether the results of the 1980 to 2008 US presidential elections influence the stock market performance of eight industries and they seek to examine factors that are expected to affect firms' stock returns around these elections. Their empirical analysis reflects firms' exposure to government policies in two ways. Design/methodology/approach -First, to determine whether investors presume any Democratic or Republican favoritism towards or biases against certain industries, the authors perform an event study for each of the eight industries around the eight elections. Second, the authors include the firms' marginal tax rate as proxy for the firms' exposure to uncertainty about fiscal policy in a regression analysis. Findings -The authors do not find a consistent pattern in industry returns when comparing the effect of Democratic vs Republican victories. However, the extent of the reaction differs among industries. The victory of a Democratic candidate rather negatively influences overall stock returns, while the results are rather mixed for Republican victories. A change in presidency from either a Democratic to a Republican candidate or vice versa causes stronger stock market effects than re-election or the election of a president from the same party. The authors also find that the firms' marginal tax rate is positively correlated with abnormal stock price returns around the election day. Originality/value -The results are relevant for academics, investors and policy makers alike because they provide insight on the question whether stock market participants respond to expected changes in policy making as a result of presidential elections.

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Section: Discussioncontrasting

confidence: 77%

Section: Literature Reviewmentioning

confidence: 99%

Effects of election results on stock price performance: evidence from 1980 to 2008

2013

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“…Few excellent works (e.g., Chien, Mayer, & Wang, 2014;Ejara, Nag, & Upadhyaya, 2012;Hung, 2013;Jang & Chang, 2016;Lin, Ho, Shen, & Wang, 2016;Sturm, 2013;Zouaoui, Nouyrigat, & Beer, 2011) deliberate on the market sentiment and financial crises, opinion-poll and equity market, PEC and stock market, U.S. elections and Taiwanese equity market, vote buying and election victory, emerging market investment strategy, and so on. However, there is a lack of studies that model the investor sentiment using the real-time expected stock market volatility prices.…”

Section: Review Of Earlier Studiesmentioning

confidence: 99%

The U.S. Presidential Election 2012/2016 and Investors’ Sentiment: The Case of CBOE Market Volatility Index

Shaikh

2019

SAGE Open

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Given that political events have substantial effect on new economic policies and economic performance of the country, this article aims to examine the behavior of the investors’ sentiment in terms of implied volatility index trailed by the U.S. presidential elections. The study empirically tests whether the presidential elections in 2012/2016 do contain the important market inclusive information to explain the expected stock market volatility. The findings indicate that investors’ concern was distracted around the presidential elections window, albeit the market performed identically in both the presidential election years. The significant fall in the implied volatility level (post-election period) is the calm before the storm, just wait and watch. The positive estimate uncovers the fact that investor worries were higher before the election day. In particular, the significant estimate of the presidential election debate shows that investors do regard the minutes of the presidential election debates in their portfolio selection. At the two elections era, on the candidacy of both the parties, the empirical result speaks marginally contrasting outcomes and falsifies the presidential election cycle hypothesis of past 29 U.S. election years. Empirical estimates conclude that the presidential elections in 2012/2016 have a strong, significant relationship with investor’s sentiment and stock market performance.

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“…17 Bechtel (2009). 18 Ejara, Nag, and Upadhyaya (2012). 19 For example, Bernhard andLeblang (2002, 2006); Jensen and Schmith (2005); Fowler (2006); Benton (2008); Furió and Pardo (2012).…”

Section: The Variety Of Equity Investor Concernsmentioning

confidence: 99%

Partisan policy promises and sector-specific stock-market performance: evidence from Mexico's 2006 presidential campaign

Benton¹

2013

Bus. polit.

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Scholars have long held that partisan politics cause aggregate-level fluctuations in markets. However, if investors hold different policy preferences, the effects of election campaigns on their behavior should be more nuanced. In particular, investors in economic sectors benefiting from neo-liberal economic policies might respond favorably to gains in support by right-leaning candidates, whereas those expected to profit from state-led economic development might react favorably to gains by left-leaning contenders. To test these propositions, I examine stock market performance by economic sector during Mexico's 2006 presidential race. Statistical analysis of pre-election polls and stock market returns during the campaign reveals that, although investors did not react to potential partisan policy change in the ways originally expected, they did respond to polling news differently by economic sector. The findings demonstrate the importance of disaggregating stock, bond, and currency markets according to economic criteria, and thus the limitations of aggregate level analysis for research on politics and markets.

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Opinion polls and the stock market: evidence from the 2008 US presidential election

Cited by 10 publications

References 13 publications

Effects of election results on stock price performance: evidence from 1980 to 2008

Effects of election results on stock price performance: evidence from 1980 to 2008

The U.S. Presidential Election 2012/2016 and Investors’ Sentiment: The Case of CBOE Market Volatility Index

Partisan policy promises and sector-specific stock-market performance: evidence from Mexico's 2006 presidential campaign

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