Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction-market analysis
Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction-market analysis
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.
Economic policy uncertainty, Election uncertainty, Financial uncertainty, Political uncertainty, Prediction markets
Goodell, John W.
8e23e6cf-6855-43c6-bac7-5d4be990747c
McGee, Richard
37a015ee-b2cf-48db-8309-a9b8e253e317
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
January 2020
Goodell, John W.
8e23e6cf-6855-43c6-bac7-5d4be990747c
McGee, Richard
37a015ee-b2cf-48db-8309-a9b8e253e317
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Goodell, John W., McGee, Richard and McGroarty, Frank
(2020)
Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction-market analysis.
Journal of Banking & Finance, 110, [105684].
(doi:10.1016/j.jbankfin.2019.105684).
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.
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Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction market analysis
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Accepted/In Press date: 21 October 2019
e-pub ahead of print date: 22 October 2019
Published date: January 2020
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© 2019
Keywords:
Economic policy uncertainty, Election uncertainty, Financial uncertainty, Political uncertainty, Prediction markets
Identifiers
Local EPrints ID: 435327
URI: http://eprints.soton.ac.uk/id/eprint/435327
ISSN: 0378-4266
PURE UUID: f4bdc6af-2456-4d51-8394-550b8369991a
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Date deposited: 30 Oct 2019 17:30
Last modified: 17 Mar 2024 02:57
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Author:
John W. Goodell
Author:
Richard McGee
Author:
Frank McGroarty
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