Partisan Shocks and Financial Markets: Evidence from Close National Elections
American Economic Journal: Applied Economics
vol. 12,
no. 4, October 2020
(pp. 224-52)
Abstract
This paper estimates the effect of partisan electoral victories on stock and bond markets. We employ a regression-discontinuity-based event study in a sample of 758 worldwide post-1945 national elections, using existing data on parliamentary elections and newly collected data on presidential elections. Left-wing electoral victories cause significant and substantial short-term decreases in stock market valuations, while the response of sovereign bond markets is mostly muted. Stock market effects are stronger and more persistent in elections in which the left's proposed economic policy is more radical and in developing economies.Citation
Girardi, Daniele. 2020. "Partisan Shocks and Financial Markets: Evidence from Close National Elections." American Economic Journal: Applied Economics, 12 (4): 224-52. DOI: 10.1257/app.20190292Additional Materials
JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- N20 Economic History: Financial Markets and Institutions: General, International, or Comparative
- N40 Economic History: Government, War, Law, International Relations, and Regulation: General, International, or Comparative
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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