This study attempts to analyze whether the developments in stock markets explain the electoral fortunes of incumbents under different political settings. Previous studies investigate political effects on stock market performance and volatility in periods immediate to election times in the US, not the effects of stock market performance on election outcomes as a macroeconomic variable. We are interested in: 1) Does stock market performance between two elections explain vote shares of incumbents in upcoming elections like other economic variables such as GDP, inflation etc.? 2) Does this effect get modified by electoral institutions? We analyze elections and stock market returns from the US, the UK, the Netherlands and Germany. All data available for returns and election results will be used in a linear regression model along with non-parametric models for sensitivity analysis. We believe this comparative empirical analysis would yield new insights on electoral systems and economic voting theory.
