📉 Global stock markets move with US election odds?
A new SSRN paper shows:
🌎 Emerging markets rally when Trump odds drop
🇲🇽 Mexico most reactive
📈 Markets cheer post-election clarity
Prediction markets = early warning system for investors.
🔗 https://ssrn.com/abstract=5239087
Summary from GPT:
📊 Global Stock Market Reactions to 2024 US Presidential Election Probabilities
Source: SSRN Working Paper
Title: Global Stock Market Reactions to 2024 US Presidential Election Probabilities: An Empirical Analysis
Title: Global Stock Market Reactions to 2024 US Presidential Election Probabilities: An Empirical Analysis
🧠 Overview
This paper explores how changes in the perceived probabilities of different US presidential candidates winning the 2024 election affect global stock markets.
🔍 Methodology
- Data Sources: High-frequency data from prediction markets like Betfair and PredictIt.
- Analysis Techniques:
- Event-study methodology
- Panel regressions
- Bootstrapped historical benchmarks
- Sample: 40 major stock indices across:
- North America
- Europe
- Asia-Pacific
- Latin America
- Middle East
📈 Key Findings
-
Market Sensitivity:
- Developed markets (Asia-Pacific, Europe): moderately sensitive to US election swings
- Emerging markets (e.g., Mexico): highly reactive to election probability shifts
-
Candidate Effects:
- Emerging markets tend to perform better when Trump’s chances are low
- Some Asian developed markets gain when Trump’s chances are high
- US markets show no strong bias toward either candidate
-
Uncertainty Resolution:
- Markets tend to rally once election uncertainty is resolved, showing global investor preference for political clarity
🧩 Implications
- Political uncertainty, quantified through prediction markets, has tangible effects on global equity markets
- Investors and policymakers should factor in political events—like US elections—when assessing risk and adjusting portfolios