HCBE Faculty Articles

Title

The Impact of Political Uncertainty and Abnormal Market Conditions on Institutional Trading Behavior

Document Type

Article

Date

Spring 2013

Publication Title

Journal of Trading

Volume

8

Issue

2

First Page

15

Last Page

22

Description

This article investigates the impact of political uncertainty and abnormal market conditions on institutional trading behavior. The study finds that institutional investors are net buyers during abnormal market decreases and net sellers during abnormal market increases. Institutional investors’ net buying activity declines because of aversion to political uncertainty. Institutional investors face high price impact during times of high political uncertainty and abnormal market conditions. In abnormal market declines, institutional sells face a 2.98% price impact. In abnormal market increases, institutional buys generate a price impact of 3.24%. This study also finds that high political uncertainty increases price impact during abnormal market declines by up to 0.10%.

DOI

10.2469/dig.v43.n4.3

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