Minute-by-Minute: Financial Markets' Reaction to the 2020 U.S. Election
Fuente:
arXiv
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| Autori principali: | , , |
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| Natura: | Preprint |
| Pubblicazione: |
2024
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| _version_ | 1866913416381202432 |
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| author | DeHaven, Matthew Firestone, Hannah Webster, Chris |
| author_facet | DeHaven, Matthew Firestone, Hannah Webster, Chris |
| contents | We find striking correlations between the presidential election outcome probability and major financial indicators, including USD currency pairs, bond prices, stock index futures, and a market volatility measure. The correlations are consistent with 'risk-on' behavior in markets, a term which describes investors moving toward riskier asset classes, as the election results became clearer. Further, we decompose the market reaction into a 'reduction in uncertainty' component and a 'probability of a Democratic party presidency' component. This decomposition reveals how markets reacted to the increasing certainty of the outcome as election results came in. Finally, we analyze the differing market reactions to the presidential election and the Senate election, including data from the unique Georgia runoffs, and demonstrate that bond prices were particularly sensitive to the probability of a combined Democratic Senate and Presidency. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2407_03527 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Minute-by-Minute: Financial Markets' Reaction to the 2020 U.S. Election DeHaven, Matthew Firestone, Hannah Webster, Chris General Economics Economics We find striking correlations between the presidential election outcome probability and major financial indicators, including USD currency pairs, bond prices, stock index futures, and a market volatility measure. The correlations are consistent with 'risk-on' behavior in markets, a term which describes investors moving toward riskier asset classes, as the election results became clearer. Further, we decompose the market reaction into a 'reduction in uncertainty' component and a 'probability of a Democratic party presidency' component. This decomposition reveals how markets reacted to the increasing certainty of the outcome as election results came in. Finally, we analyze the differing market reactions to the presidential election and the Senate election, including data from the unique Georgia runoffs, and demonstrate that bond prices were particularly sensitive to the probability of a combined Democratic Senate and Presidency. |
| title | Minute-by-Minute: Financial Markets' Reaction to the 2020 U.S. Election |
| topic | General Economics Economics |
| url | https://arxiv.org/abs/2407.03527 |