2022/03/04 by Vikas Agarwal, Hadiye Aslan, Lixin Huang +1 · 1 citation
Economics, Econometrics and Finance · Business, Management and Accounting · #Housing Market and Economics #Monetary Policy and Economic Impact #Financial Literacy, Pension, Retirement Analysis
paper · pdf · doi:10.1017/s0022109022000114
Abstract Using microlevel panel data and a difference-in-differences identification strategy, we study the effect of political uncertainty on household stock market participation. We find that households significantly reduce their participation and reallocate funds to safer assets during periods of increased political uncertainty prior to gubernatorial elections. The decline in participation is related to households’ response to elevated asset risk and their incentive to hedge increased labor income risk. In situations where uncertainty remains high after elections, pre-election reduction in participation is only partially reversed.