Pre-Election Drift in the Stock Market

6 Pages Posted: 15 Apr 2020

Date Written: February 4, 2020

Abstract

A particular event like elections are making lots of noise, but not only in our regular life where we should participate and so vote for our preferred candidate/party. This process also impacts financial markets. The uncertainty, which implies from the result of the elections, affects the volatility of the financial markets, which can easily double. In this paper, we were focused only on one specific market where we were seeking any pattern which could be profitable by assembling an investment strategy on it. Analyzing the stock market of the United States, where the elections occur on the exact day every even year, we found a specific pattern in the days before elections. This positive drift starts as soon as the fifth day before the election’s day and ends at the end of the election’s day with almost 2,5 % performance on average. An additional advantage of this pre-election pattern is its independence from the elections results even it is tied to elections. Last years showed us bigger market moves around elections due to increased uncertainty caused by political reasons which aren’t receding nowadays. Therefore, the period before elections could be more profitable regardless of the result of the elections.

Keywords: Calendar Anomaly, Seasonal Anomaly, Elections, Trading Strategy, Positive Drift

JEL Classification: G11, G14,

Suggested Citation

Vojtko, Radovan and Cisár, Dominik, Pre-Election Drift in the Stock Market (February 4, 2020). Available at SSRN: https://ssrn.com/abstract=3531847 or http://dx.doi.org/10.2139/ssrn.3531847

Radovan Vojtko

Quantpedia ( email )

Dulovo namestie 14
Bratislava, 85110
Slovakia

HOME PAGE: http://Quantpedia.com

Dominik Cisár (Contact Author)

Quantpedia.com ( email )

Dulovo námestie 14
Bratislava, 85 110
Slovakia
+421 949 034 842 (Phone)

HOME PAGE: http://https://quantpedia.com/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
316
Abstract Views
1,416
Rank
188,775
PlumX Metrics