The University of Southampton
University of Southampton Institutional Repository

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
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.
Political uncertainty, Economic policy uncertainty, Financial uncertainty, Election uncertainty, Prediction markets
0378-4266
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.
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).

Record type: Article

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.

Text
Election uncertainty, economic policy uncertainty and financial market uncertainty: A prediction market analysis - Author's Original
Restricted to Repository staff only
Request a copy
Text
JBF-accepted_version - Accepted Manuscript
Restricted to Repository staff only until 22 April 2021.
Request a copy

More information

Accepted/In Press date: 21 October 2019
e-pub ahead of print date: 22 October 2019
Published date: January 2020
Keywords: Political uncertainty, Economic policy uncertainty, Financial uncertainty, Election 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
ORCID for Frank McGroarty: ORCID iD orcid.org/0000-0003-2962-0927

Catalogue record

Date deposited: 30 Oct 2019 17:30
Last modified: 06 Dec 2019 01:36

Export record

Altmetrics

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×