Democratic Processes and Financial Markets
Subtitle: Pricing Politics
Edition: 1 edition
Publisher: Cambridge University Press
Published: July 24, 2006
Language: eng
Format: Paperback
Number of pages: 272
ISBN-13: 9780521678384
Subjects: Investment & securities; POLITICS & GOVERNMENT; Political Science; Finance; Politics / Current Events; Politics/International Relations; Political aspects; General; Business & Economics / Economics / General; Economics; Capital market; International economic relations
First sentence: Political processes - elections, cabinet formations, referenda, legislative debates - determine a government's economic policies, which, in turn, condition the environment for investment.
Description: "William Bernhard and David Lebland examine the conditions under which democratic events, including elections, cabinet formations, and government dissolutions, affect asset markets. Where these events have less predictable outcomes, market returns are depressed and volatility increases. In contrast, where market actors can forecast the result, returns do not exhibit any unusual behavior. Further, political expectations condition how markets respond to the political process. When news causes market actors to update their political beliefs, market actors reallocate their portfolios, and overall market behavior changes. To measure political information, the authors employ sophisticated models of the political process. They draw on a variety of models of market behavior, including the efficient markets hypothesis, capital asset pricing model, and arbitrage pricing theory, to trace the impact of political events on currency, stock, and bond markets.

The analysis will appeal to academics, graduate students, and advanced undergraduates across political science, economics, and finance."--Jacket.