Access Type
Open Access Dissertation
Date of Award
January 2014
Degree Type
Dissertation
Degree Name
Ph.D.
Department
Management and Information Systems
First Advisor
Mbodja Mougoué
Abstract
I quantify the relationship between political uncertainty and equity volatility in the months around US elections from 1989-2012. The Economic Policy Uncertainty Index and Stockholm International Peace Research Institute (SIPRI) data are employed to measure political uncertainty faced by military contractors, capitalizing on the unique monopsony-oligopoly business environment of these firms. I employ a GARCH (1,1) model with cross-sectionally correlated moments to produce daily firm-election volatility measures. Volatility increases 11% for local, 27% for midterm, and 43% for presidential elections. These measures demonstrate that all election categories: local, federal, presidential, and midterm exhibit differential effects on equity volatility. My results contrast prior equity volatility research, showing that equity volatility increases much earlier but more gradually for US elections than for international (parliamentary) elections. I show that the political uncertainty index values in September predict the equity volatility before, during, and after November elections. I present a parsimonious piecewise function to model the distinct and predictable daily equity volatility profile in the months around US elections.
Recommended Citation
Ross, Matthew Mark, "Elections And Asset Pricing: The Politically Sensitive Equity Of Us Military Contractors" (2014). Wayne State University Dissertations. 996.
https://digitalcommons.wayne.edu/oa_dissertations/996
Included in
Finance and Financial Management Commons, Other Economics Commons, Political Science Commons