Precarious Politics and Return Volatility

49 Pages Posted: 18 Dec 2008 Last revised: 28 Jul 2011

See all articles by Maria Boutchkova

Maria Boutchkova

University of Edinburgh

Hitesh Doshi

University of Houston - C.T. Bauer College of Business

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Alexander Molchanov

Massey University

Multiple version iconThere are 2 versions of this paper

Date Written: July 25, 2011

Abstract

We examine how local and global political risks affect industry return volatility. Our central premise is that some industries are more sensitive to political events than others. We find that industries that are more dependent on trade, contract enforcement, and labor exhibit greater return volatility when local political risks are higher. Political uncertainty in countries of trading partners of trade-dependent industries similarly results in greater volatility. Volatility decomposition results indicate that while systematic volatility is associated with domestic political uncertainty, global political risks translate into larger idiosyncratic volatility.

Keywords: Politics, Volatility

JEL Classification: F30

Suggested Citation

Boutchkova, Maria and Doshi, Hitesh and Durnev, Artyom and Molchanov, Alexander, Precarious Politics and Return Volatility (July 25, 2011). Available at SSRN: https://ssrn.com/abstract=1317834 or http://dx.doi.org/10.2139/ssrn.1317834

Maria Boutchkova

University of Edinburgh ( email )

Business School
29 Buccleuch Place
Edinburgh, EH89JS
United Kingdom

Hitesh Doshi

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States

Artyom Durnev (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)

HOME PAGE: http://www.artdurnev.com

Alexander Molchanov

Massey University ( email )

Auckland
New Zealand

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