Title: Impact of elections on stock price graph: a case of US elections

Authors: Abhishek Behl; Shreya Sethi

Addresses: Symbiosis Centre for Management and Human Resource Development, Symbiosis International University, Pune, India ' IIT Bombay, Powai, Mumbai 400 076, Maharashtra, India

Abstract: This paper focuses on the impact of US presidential elections on stock market. Thus, this paper aims to analyse the impact of the US presidential elections that have taken place from 1980 to 2010, on the stock market performance for eight different industries. The paper puts special emphasis on studying the abnormality of return related to stock prices and evaluating the uncertainty between the firm's tax policy and stock market, around the time of upcoming presidential elections. This is a comparative study wherein the effects of pre- and post-election have been assessed. The empirical analysis undertaken relies on secondary data collected from various online sources. The results of the papers highlight; industry return data churn out ambiguous results when compared for winning election party. Also, the rate of reaction tends to differ grossly with respect to different industries. Democratic victory impacts the stock return negatively but in case of Republican victory the result is insignificant. A positive correlation exists between abnormal stock price and firms' marginal tax rate around the day of the election. The paper proves there is a transitional effect of election, felt in the stock market irrespective of the anticipated outcome of the election.

Keywords: US presidential elections; Democratic Party; Republican Party; event study analysis; Carhart four-factor model; election impact; stock markets; stock price graph; USA; United States; stock market performance; abnormal stock prices; marginal tax rates.

DOI: 10.1504/IJMP.2016.077817

International Journal of Management Practice, 2016 Vol.9 No.3, pp.238 - 256

Received: 29 May 2015
Accepted: 28 Oct 2015
Published online: 16 Jul 2016 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article