Bialkowski, J.Gottschalk, K.Wisniewski, T.2011-02-212011-02-2120062006200626-2006https://hdl.handle.net/10292/1140This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an Election Day, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a coalition with a majority of seats in parliament significantly contribute to the magnitude of the election shock. Our findings have important implications for the optimal strategies of risk-averse stock market investors and participants of the option markets.2006 © - Copyright of the Author(s)Working PaperOpenAccess