Elections and the Stock Market: Analysis

The questions our research aims to address are: Do events associated with the presidential election cycle produce predictable and consistent results in each election year on the three major stock indices values? Is there an increase in volatility as the election approaches? Was there an increase in trading volume as the election cycle progressed? Does this increase in volume throughout the election cycle result in an increase in the value of the indices? Dates of specific interest to our research are the primary debates, Super Tuesday, the vice-president nomination, the Democratic and Republican National Convention, final nominee debates, the day of the election, and the announcement of the president-elect. Our financial data is gathered from the three major American indices (NASDAQ, Dow Jones Industrial Average (DJI), Standard and Poor 500 Index (S&P 500)), and a variation on The Chicago Board Options Exchange's Volatility Index (VIX). While finding market returns and standard deviations and using them in further analysis, we will be able to draw a correlation between major events and in volatility with comparison to a non-election year, thus creating an avenue to develop a relationship between stock market volatility and presidential elections.