Many analysts, who had anticipated a great market anxiety resulting in market-wide stock price losses over the event of a Trump presidential victory, remain puzzling through why the market rebounded since the next election day. Whatever the reason, investors appear to be digesting Trump's win speedier than expected. The present paper examines , at sectoral level, the behavior of a variety of US stock price indices (Dow Jones Industrial Average, S\&P 500 and Nasdaq Composite) surrounding the announcement of the Republican candidate's win on 08 November 2016. Although all companies face ongoing uncertainty , the 2016 US election outcome is likely to divide the stock market into losing (technology and utilities) and winning sectors (health care , oil and gas, real estate, defense, financials and consumer goods and services) . Judging by the campaign promises, the best-performing companies are generally those that will gain directly from Trump's proposals revolving around rising infrastructurespending , renegotiating trade agreements, loosening financial regulation, easing restrictions on energy production, and repealing Obamacare.
There is bountiful evidence that political uncertainty stemming from presidential elections or doubt about the direction of future policy make financial markets significantly volatile, especially in proximity to close elections or elections that may prompt radical policy changes. Although several studies have examined the association between presidential elections and stock returns, very little attention has been given to the impacts of elections and election induced uncertainty on stock markets. This paper explores , at sectoral level, the uncertain information hypothesis (UIH) as a means of explaining the reaction of markets to the arrival of unanticipated information. This hypothesis postulates that political uncertainty is greater prior to the elections (relative to pre-election period) but is resolved once the outcome of the elections is determined (relative to post-election period). To this end, we adopt an event-study methodology that examines abnormal return behavior around the election date. We show that collapsing stock returns around the election result is reversed by positive abnormal return on the next day, except some cases where we note negative responses following the vote count. Although Trump's win plunges US into uncertain future, positive reactions of abnormal return are found. Therefore, our results do not support the UIH hypothesis. Besides, the effect of political uncertainty is sector-specific. While some sectors emerged winners (healthcare , oil and gas, real estate, defense, financials and consumer goods and services) , others took the opposite route (technology and utilities). The winning industries are generally those that will benefit from the new administration's focus on rebuilding infrastructure , renegotiating trade agreements, reforming tax policy and labour laws, increasing defense funding, easing restrictions on energy production, and rolling back Obamacare.
R
Many analysts, who had anticipated a great market anxiety resulting in market-wide stock price losses over the event of a Trump presidential victory, remain puzzling through why the market rebounded since the next election day. Whatever the reason, investors appear to be digesting Trump's win speedier than expected. The present paper examines
There is bountiful evidence that political uncertainty stemming from presidential elections or doubt about the direction of future policy make financial markets significantly volatile, especially in proximity to close elections or elections that may prompt radical policy changes. Although several studies have examined the association between presidential elections and stock returns, very little attention has been given to the impacts of elections and election induced uncertainty on stock markets. This paper explores
R
behavior of a variety of US stock price indices (Dow Jones Industrial Average, S\&P 500 and Nasdaq Composite) surrounding the announcement of the Republican candidate's win on 08 November 2016. Although all companies face ongoing uncertainty , the 2016 US election outcome is likely to divide the stock market into losing (technology and utilities) and winning sectors (health care
uncertain information hypothesis (UIH) as a means of explaining the reaction of markets to the arrival of unanticipated information. This hypothesis postulates that political uncertainty is greater prior to the elections (relative to pre-election period) but is resolved once the outcome of the elections is determined (relative to post-election period). To this end, we adopt an event-study methodology that examines abnormal return behavior around the election date. We show that collapsing stock returns around the election result is reversed by positive abnormal return on the next day, except some cases where we note negative responses following the vote count. Although Trump's win plunges US into uncertain future, positive reactions of abnormal return are found. Therefore, our results do not support the UIH hypothesis. Besides, the effect of political uncertainty is sector-specific. While some sectors emerged winners (healthcare
R
. Judging by the campaign promises, the best-performing companies
, others took the opposite route (technology and utilities). The winning industries
R
gain directly from Trump's proposals revolving around rising infrastructurespending
benefit from the new administration's focus on rebuilding infrastructure
R
loosening financial regulation,
reforming tax policy and labour laws, increasing defense funding,
R
repealing
rolling back