Democratic Processes and Financial Markets Pricing Politics Bernhard Leblang

Democratic Processes and Financial MarketsPricing Politics\nAuthor(s): William Bernhard, David Leblang\nFormat: Hardback\nPublisher: Cambridge University Press, United Kingdom\nImprint: Cambridge University Press\nISBN-13: 9780521861229, 978-0521861229\nSynopsis\nThe authors 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, Professors Bernhard and Leblang employ sophisticated models of the political process. They draw on .