Election Uncertainty and Market Volatility: The Case of U.S. Presidential Elections. : Investigating the role of election uncertainty in economic policy, financial, geopolitical, and climate-related policy uncertainty.

Elections are politically significant events that generate uncertainty in financial markets. This uncertainty influences investor behavior, shapes expectations regarding future policy, and alters the perception of various types of risk. This thesis investigates how election-related uncertainty affects four dimensions of policy and market uncertainty: financial uncertainty, economic policy uncertainty, geopolitical policy uncertainty, and climate policy uncertainty. A particular emphasis is placed on comparing the effects of partisan election uncertainty, which captures the probability that the incumbent party remains in power, with nonpartisan election uncertainty, which reflects the closeness of the electoral race regardless of party identity. The empirical analysis focuses on United States presidential elections, utilizing daily data from multiple electoral cycles and applying a structural vector autoregression model with panel data. The impulse response analysis reveals that partisan uncertainty produces strong and statistically significant effects on both financial and economic policy uncertainty, while nonpartisan uncertainty has minimal impact. Although climate and geopolitical policy uncertainty do not exhibit pronounced short-term reactions, the forecast error variance decomposition shows that partisan uncertainty accounts for a substantial portion of their variation over longer horizons. These findings demonstrate that financial markets react more strongly to expected changes in political direction than to general uncertainty about electoral outcomes.