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The price of populism: Financial market outcomes of populist electoral success

Sebastian Stöckl and Martin Rode

Journal of Economic Behavior & Organization, 2021, vol. 189, issue C, 51-83

Abstract: Following financial research on the importance of public policy for asset prices, we hypothesize that the success of populist movements impacts risk assessments in financial markets. Building a novel dataset, findings show for a sample of Western democracies that the success of populist parties has a direct impact on volatility in major domestic market indexes, measured from option prices spanning national elections. Despite its anti-capitalist rhetoric, the political insecurity generated by populist movements on the far left only partially translates into financial insecurity in the context of institutionalized democracies. In turn, we find the electoral success of right-wing populists to reduce risk assessments, which could be driven by its frequent association with rent-seeking and big business.

Keywords: Populism; Elections; Political uncertainty; Option markets; Implied volatility; Political ideology (search for similar items in EconPapers)
JEL-codes: G12 G18 P16 P43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:189:y:2021:i:c:p:51-83

DOI: 10.1016/j.jebo.2021.06.037

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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