Recovering Election Winner Probabilities from Stock Prices
10 Pages Posted: 10 Dec 2020
Date Written: November 30, 2020
After the 2020 U.S. presidential election, counting votes and calling states took more time than usual, particularly in battleground states. In the days following the election, winning probabilities changed frequently as new results were tabulated. Based on the sensitivity of stocks to changes in winning probabilities observed before the election, we show how the stock market's assessment of the unobserved post-election winning probabilities can be backed out from stock prices. Our approach is based solely on publicly available data.
Keywords: Election winner probabilities, Political prediction markets, Election portfolios
JEL Classification: G11, D72
Suggested Citation: Suggested Citation