Authors
Elvira Sojli, Wing Wah Tham
Publication date
2015/8/1
Journal
Journal of Econometrics
Volume
187
Issue
2
Pages
622-633
Publisher
North-Holland
Description
This paper investigates the effect of divided governments on asset prices. For identification, we use changes in the implied probability of a divided government while votes are being counted. Using high frequency data from the betting market and US overnight futures market, we estimate a 1.4% decrease in the S&P 500 futures in the election event of a divided government. Results are similar for the 2010 UK election. Further analysis shows that divided government affects expected stock returns through the mechanism of policy uncertainty.
Total citations
Scholar articles
E Sojli, WW Tham - Journal of Econometrics, 2015