The effect of the USA Presidential Debate on the stock market performance

The very core idea behind political uncertainty lies with the left-wing and right-wing ideology conflict for the optimal governing policy. Such uncertainty is affecting the stock market performance and is enabling a bias in the decision-making process among investors. This paper takes a particular interest in the USA Presidential Debate, and it uses the debate as a proxy for political uncertainty. Through an event study methodology, it investigates the effect of the USA Presidential Debate on the stock market performance. More specifically, the three debates between Hilary Clinton and Donald Trump, Barack Obama and John McCain, and George W. Bush and Al Gore. A negative market reaction effect was found in six out of nine debates, while a positive in one out of nine. Furthermore, through a regression analysis, it is observed that the effect of political uncertainty varies significantly across firms and industries.