The calming effects of conflict: The impact of partisan conflict on market volatility

被引:3
作者
Beyer, Deborah B. [1 ]
Fan, Zaifeng S. [2 ]
机构
[1] Univ Wisconsin Stevens Point, Sch Business & Econ, 2100 Main St, Stevens Point, WI 54481 USA
[2] Univ Wisconsin Whitewater, Dept Finance & Business Law, 800 Main St, Whitewater, WI 53190 USA
关键词
Stock market volatility; Partisan conflict; Political events; Politically-sensitive industries; POLITICAL UNCERTAINTY; POLICY UNCERTAINTY; RISK; POLARIZATION; RETURNS; GOVERNMENT; CYCLES; EQUITY; STOCKS;
D O I
10.1016/j.irfa.2022.102462
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
In recent decades, an increasing divide in political ideologies between Republicans and Democrats has had a notable impact on financial markets. In this paper, we investigate the effect of political conflict, as measured by the partisan conflict index (PCI), on both market and industry-level volatility. We find that PCI has a significant negative impact on market volatility, robust to different regression models. We provide evidence that such impact is not driven by dramatic political events, namely wars and presidential elections, or by presidential party. When controlling for market cycles, we show that PCI reduces volatility during expansionary periods but increases volatility during recessions. Furthermore, at the industry level, we find that PCI decreases volatility overall. We also find that PCI decreases the volatility of politically-sensitive industries significantly more that it does with other industries. These results can inform government policy makers, analysts, investors, and academics alike.
引用
收藏
页数:12
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