Political Uncertainty and Commodity Prices

Fisher College of Business Working Paper No. 2017-03-025

Charles A. Dice Center Working Paper No. 2017-25

58 Pages Posted: 6 Nov 2017

See all articles by Kewei Hou

Kewei Hou

Ohio State University (OSU) - Department of Finance

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Date Written: October 2017

Abstract

Using a comprehensive sample of 87 commodities, we examine the effect of political uncertainty on commodity prices. We show that political uncertainty surrounding U.S. presidential elections has a significant negative impact on commodity prices worldwide, likely due to shrinking demand before the elections. On average, commodity prices decline by 6.4% in the quarter leading up to U.S. elections. This effect holds true for gold, and is stronger for close elections and elections during recessions. On the other hand, political uncertainty in commodity producing countries with little demand pushes commodity prices up by 5.4% in the quarter before their national elections.

Keywords: Political Uncertainty, Commodity Prices, U.S. Presidential Elections

JEL Classification: G12, G14, G15, G18, Q02

Suggested Citation

Hou, Kewei and Tang, Ke and Zhang, Bohui, Political Uncertainty and Commodity Prices (October 2017). Charles A. Dice Center Working Paper No. 2017-25. Available at SSRN: https://ssrn.com/abstract=3064295 or http://dx.doi.org/10.2139/ssrn.3064295

Kewei Hou (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-0552 (Phone)
614-292-2418 (Fax)

Ke Tang

Institute of Economics, School of Social Sciences, Tsinghua University ( email )

No.1 Tsinghua Garden
Beijing, 100084
China
13466777332 (Phone)

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

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