Political-Economic Uncertainty and U.S. Equity Markets: How Presidential Elections Impact Returns and Volatility

The U.S. presidential election is one of the most important global events every four years. The results cause significant economic and political uncertainty and dramatically influence equity market performance and volatility. This study aims to establish whether economic and political uncertainty and shock events starting 100 days before election day and ending 100 days after election day cause abnormal market returns and volatility. The findings show a statistically significant positive relationship between uncertainty outside of the 100-day windowstionship between uncertainty inside the 100 days surrounding the and returns and volatility, yet a negative rela election and returns and volatility. The study also finds a statistically significant positive relationship between economic shocks outside of the 100-day windows and volatility, yet a negative relationship between these shocks and returns. Something interesting to note is the direction of both relationships: both have both positive and negative directionality, which is further discussed later in the paper.