The Global Stock Market Reactions to the 2016 U.S. Presidential Election
Donald Trump’s victory in the 2016 presidential election was a political surprise to almost everyone, domestically and internationally. This paper investigates international investors’ reaction to this apparent global political surprise. Employing an event study methodology, we test the three widely...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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SAGE Publishing
2023-06-01
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| Series: | SAGE Open |
| Online Access: | https://doi.org/10.1177/21582440231181352 |
| _version_ | 1797801879956094976 |
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| author | Delia Diaconaşu Seyed Mehdian Ovidiu Stoica |
| author_facet | Delia Diaconaşu Seyed Mehdian Ovidiu Stoica |
| author_sort | Delia Diaconaşu |
| collection | DOAJ |
| description | Donald Trump’s victory in the 2016 presidential election was a political surprise to almost everyone, domestically and internationally. This paper investigates international investors’ reaction to this apparent global political surprise. Employing an event study methodology, we test the three widely known behavioral hypotheses concerning international investor reaction to this unexpected news, that is, the Overreaction Hypothesis (OH), the Uncertain Information Hypothesis (UIH), and the Efficient Market Hypothesis (EMH). The study results show that most of the indexes initially reacted unfavorably to the announcement of Trump’s win; however, subsequent stock index returns exhibit corrective upward patterns consistent with the predictions of the OH, except for the Latin American and France markets. The reactions of the other indexes appear to be favorable and in line with the prediction of the UIH. These findings suggest that in most countries under study, investors could utilize contrarian strategies to generate abnormal returns, as evidenced by price reversal following the arrival of the surprise. JEL classification : G14, G15. |
| first_indexed | 2024-03-13T04:58:16Z |
| format | Article |
| id | doaj.art-032978de99ab43798ee539dfee282a35 |
| institution | Directory Open Access Journal |
| issn | 2158-2440 |
| language | English |
| last_indexed | 2024-03-13T04:58:16Z |
| publishDate | 2023-06-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | SAGE Open |
| spelling | doaj.art-032978de99ab43798ee539dfee282a352023-06-17T10:03:46ZengSAGE PublishingSAGE Open2158-24402023-06-011310.1177/21582440231181352The Global Stock Market Reactions to the 2016 U.S. Presidential ElectionDelia Diaconaşu0Seyed Mehdian1Ovidiu Stoica2Department of Social Sciences and Humanities, Institute of Interdisciplinary Research, Alexandru Ioan Cuza University of Iasi, Iasi, RomaniaSchool of Management, University of Michigan-Flint, MI, USAFaculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, Iasi, RomaniaDonald Trump’s victory in the 2016 presidential election was a political surprise to almost everyone, domestically and internationally. This paper investigates international investors’ reaction to this apparent global political surprise. Employing an event study methodology, we test the three widely known behavioral hypotheses concerning international investor reaction to this unexpected news, that is, the Overreaction Hypothesis (OH), the Uncertain Information Hypothesis (UIH), and the Efficient Market Hypothesis (EMH). The study results show that most of the indexes initially reacted unfavorably to the announcement of Trump’s win; however, subsequent stock index returns exhibit corrective upward patterns consistent with the predictions of the OH, except for the Latin American and France markets. The reactions of the other indexes appear to be favorable and in line with the prediction of the UIH. These findings suggest that in most countries under study, investors could utilize contrarian strategies to generate abnormal returns, as evidenced by price reversal following the arrival of the surprise. JEL classification : G14, G15.https://doi.org/10.1177/21582440231181352 |
| spellingShingle | Delia Diaconaşu Seyed Mehdian Ovidiu Stoica The Global Stock Market Reactions to the 2016 U.S. Presidential Election SAGE Open |
| title | The Global Stock Market Reactions to the 2016 U.S. Presidential Election |
| title_full | The Global Stock Market Reactions to the 2016 U.S. Presidential Election |
| title_fullStr | The Global Stock Market Reactions to the 2016 U.S. Presidential Election |
| title_full_unstemmed | The Global Stock Market Reactions to the 2016 U.S. Presidential Election |
| title_short | The Global Stock Market Reactions to the 2016 U.S. Presidential Election |
| title_sort | global stock market reactions to the 2016 u s presidential election |
| url | https://doi.org/10.1177/21582440231181352 |
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