Can we insure against political uncertainty ?

Abstract

I show that shares currently traded on U.S. stock markets can be used to hedge political uncertainty. Focusing on the 2000 U.S. presidential election, I construct two “presidential portfolios” composed of selected stocks anticipated to fare differently under a Bush versus a Gore presidency. To construct these portfolios I use data on campaign contributions by publicly traded corporations and identify the major contributors on each side. Using daily observations for the six months before the election took place, I show that the excess returns of these portfolios with respect to overall market movements are significantly related to changes in electoral polls. JEL classification numbers: D7, G10.

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Cite this paper

@inproceedings{Mattozzi2004CanWI, title={Can we insure against political uncertainty ?}, author={Andrea Mattozzi and Celso Brunetti and Alessio Caldarera and Marco Cozzi and Daniela Di Iorio}, year={2004} }