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Political Event Portfolios

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Reference

Hanke, M., Stöckl, S., & Weissensteiner, A. (2020). Political Event Portfolios. University of Liechtenstein.

Publication type

Working Paper

Abstract

We combine stock returns with data from political betting markets to assess the individual stock return sensitivity to potential outcomes of political events such as elections. Classifying stocks into expected conditional winners and losers before the event, we form portfolios that generate large positive returns after the event date conditional on correctly anticipating the outcome. The approach is illustrated using data from the US presidential election 2016 and the Brexit referendum 2016. We show that these sensitivities contain additional information compared to selected firm characteristics, whose predictive power for event-related returns has been documented in previous literature, and compared to returns on the first day after the events.

Persons

Organizational Units

  • Chair in Finance