The Cost of Sentiment Swings: How Election Expectations Impact US Stock Market Volatility

This study aims to find a causal relationship between national polls movements during US presidential election cycles and changes in volatility among US financial markets. It does this through the use of a two-stage instrumental variable model, using the occurrence of key political events as the instrument. Through the use of this model, I am able to isolate daily movements in US stock market index prices to only those attributable to changes in national polling data for presidential candidates.