The financial costs of political uncertainty: Evidence from the 2016 US presidential elections

Abstract

The victory of Mr. Donald Trump came as a surprise to a wide range of market participants. Some of the elements of his economic plan were envisaged to affect all US sectors. This paper assesses the reactions of disaggregated US stock market to the 2016 US presidential election results, and possible deregulation that is to follow after his inauguration. We find that the different US sectors were significantly and varyingly influenced by the election result, and were greatly reactive during the days after the inauguration. This underscores that uncertainty tends to persist and even rises since the President‐elect took office.

The Global Stock Market Reactions to the 2016 U.S. Presidential Election

“…Specifically, the authors demonstrated that S&P 500 firms with pre-existing presidential ties generated higher abnormal returns over a 21-day post-election period and, in addition, during his presidential term, they received more government contracts and were subject to more favorable regulation than nonconnected counterparts. Along these lines, Selmi and Bouoiyour (2020) using an event study methodology, concluded that the election result and the presidential inauguration affected the U.S. stock market in various ways. More precisely, consumer discretionary, energy, industrials, materials, aerospace and defense and real estate sectors exhibited positive reactions, while consumer staples, financial, health care, information technology, communication, and utility sectors were adversely influenced by the election results.…”

Rusya İle Yaşanan Poli̇ti̇k Ve Ekonomi̇k Problemleri̇n Türk Pay Pi̇yasasi Si̇stemati̇k Ri̇ski̇ne Etki̇si̇: 24 Kasim 2015-15 Temmuz 2016 Dönemi̇ Üzeri̇ne Bi̇r İnceleme

“…Finansal piyasalar ülkedeki makroekonomik, maliye ve para politikaları üzerinde önemli etkiler yaratabilecek siyasi olaylara tepki verme eğilimindedir. Bu siyasi olaylar, bu olayların sonuçlarına göre beklentilerini oluşturan ve revize eden yatırımcılar tarafından izlenmektedir (Selmi & Bouoiyour, 2020). Politik ve ekonomik yansımaları olan olaylar, ilgili ülke piyasasında risk ve getiri üzerinde etkili olmaktadır.…”