Political geography and stock market volatility
The role of political alignment across sentiment regimes
Publication date
2025-08-07
Document type
Forschungsartikel
Author
Organisational unit
Scopus ID
Publisher
Wiley
Series or journal
Scottish Journal of Political Economy
ISSN
Periodical volume
2025
Article ID
e70028
Is a version of
Peer-reviewed
✅
Part of the university bibliography
✅
Language
English
Keyword
investor sentiment
political alignment
random forests
stock market volatility
Abstract
We study the nexus between political geography and stock market volatility by examining the interrelation between political geography and the predictive relation between the state‐ and aggregate‐level stock market volatility via recently constructed measures of political alignment. Using data for 1994–2023 and random forests, we show that the importance of the state‐level volatilities as drivers of aggregate volatility displays considerable variation in the cross‐section and across time. Stronger political alignment of a state with the ruling party is associated with a lower contribution of the state's volatility to aggregate volatility. This negative link is significant during high‐sentiment periods.
Description
This is an open access article under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/).
Version
Online first
Access right on openHSU
Metadata only access
Open Access Funding
Wiley (DEAL)