Published April 26, 2019
| Accepted Version
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Can We Insure Against Political Uncertainty? Evidence from the U.S. Stock Market
- Creators
- Mattozzi, Andrea
Abstract
We show that existing stocks that are currently traded in the U.S. stock market can be used to hedge political uncertainty. Focusing on the 2000 U.S. Presidential election, we construct two "presidential portfolios" composed of selected stocks anticipated to fare differently under a Bush versus a Gore presidency. To construct these portfolios we use data on campaign contributions by publicly traded corporations and identify the major contributors on each side. Using daily observations for the six months before the election took place, we show that the excess returns of these portfolios with respect to overall market movements are significantly related to changes in electoral polls.
Additional Information
I am grateful to Bob Inman, Andrew Postlewaite, Frank Schorfheide, and in particular to Antonio Merlo for their comments and encouragement. I also benefitted from discussions with Celso Brunetti, Marco Cozzi, Jan Eeckhout, Daniela Iorio, Dirk Krueger and Nicola Persico. All usual disclaimers apply.Attached Files
Accepted Version - sswp1207.pdf
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Additional details
- Eprint ID
- 95033
- Resolver ID
- CaltechAUTHORS:20190426-135654556
- Created
-
2019-04-26Created from EPrint's datestamp field
- Updated
-
2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 1207