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The 2000 presidential election and the information cost of sensitive versus

Author

Listed:
  • Yan He
  • Hai Lin
  • Chunchi Wu
  • Uric B. Dufrene

Abstract

We investigate the information cost of stock trading during the 2000 presidential election. We find that the uncertainty of the election induces information asymmetry of politically sensitive firms under the Bush/Gore platforms. The unusual delay in election results in a significant increase in the adverse selection component of trading cost of politically sensitive stocks. Cross-sectional variations in bid-ask spreads are significantly and positively related to changes in information cost, controlling for the effects of liquidity cost and stock characteristics. This empirical evidence is robust to different estimation methods.

Suggested Citation

  • Yan He & Hai Lin & Chunchi Wu & Uric B. Dufrene, 2013. "The 2000 presidential election and the information cost of sensitive versus," Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    • Handle: RePEc:wyi:wpaper:001975
    as

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    File URL: https://econpub.xmu.edu.cn/research/repec/upload/200783153947055475115776.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Presidential election; information asymmetry; transaction costs; bid-ask spreads; adverse selection cost;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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    This paper has been announced in the following NEP Reports:

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