Price-earnings changes during US presidential election cycles: voter uncertainty and other determinants

Abstract

Elections, Political business cycle, Political economy, Financial markets, G10, G14, G18,

Political uncertainty and the 2012 US presidential election: A cointegration study of prediction markets, polls and a stand-out expert

“…We note that we are using the word "efficiency" broadly as, unlike commodity futures markets where there is a spot price, there is no way to determine which presidential prediction is best. However, we feel that since previous literature (e.g., Goodell and Vahamaa 2013;Goodell and Bodey 2012) finds that presidential election predictions and election uncertainty are…”

“…For instance, Goodell and Vahamaa (2013) find that presidential prediction markets affect the VIX; while Goodell and Bodey (2012) find presidential prediction markets affect the price earnings ratios of the S&P500. Therefore the study of prediction markets is important to understanding their potential utility for financial forecasting.…”

“…8 Goodell and Bodey (2012) and Goodell and Vahamaa (2013) have looked at the effect of the Iowa Presidential Election prediction market on price-earnings ratios and market volatility respectively. 1…”

“…Recently some papers (e.g., Goodell and Bodey 2012;and Goodell and Vahamaa 2013) have used data from the Iowa Election "winner-take-all" Market (IEM) to infer probabilities of presidential candidates winning the election. As noted by Berg et al (2008), Arbitrage Pricing Theory implies that…”

Test of Linkage between Governance Style and National Economic Indices

“…Here the regional regulatory agency's (European central bank) objective of sustainable price stability comes to the fore (He, Lin, Wu & Dufrene, (2009). This reduces the probability of volatility as winner of the election becomes clearer (Goodell & Bodey, 2012).…”