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Journals / Black Sea Journal of Public and Social Science / 2026 / Sayı: 9

The Impact of US Presidential Elections on Global Market Dynamics: An Analysis of the 2020–2024 Elections

Emrah Şahin(HİTİT ÜNİVERSİTESİ)0000-0002-1001-6511
Pages
32–46
Publication Date
2026-01-27
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AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

Overall, the findings show that the effect of U.S. presidential elections on international financial markets differs depending on the political stance of the elected leader; the Trump administration tends to favor developed markets, while the Biden administration offers a more favorable pricing environment for emerging markets.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:By examining both short-term price reactions and long-term dynamic interactions, this study investigates how the U.S. presidential elections affect international financial markets.
📊
Key Findings & Data:Using the MSCI Developed Markets (DM) and MSCI Emerging Markets (EM) indexes, the research focuses on the elections won by Joe Biden in 2020 and Donald Trump in 2024.
💡
Conclusion & Impact:Overall, the findings show that the effect of U.S. presidential elections on international financial markets differs depending on the political stance of the elected leader; the Trump administration tends to favor developed markets, while the Biden administration offers a more favorable pricing environment for emerging markets.
🔬Design:Araştırma Makalesi
📍Scope:2020 Verileri
⚙️Variables:Developed and emerging markets (DM and EM) · Market integration · Event study

Abstract

By examining both short-term price reactions and long-term dynamic interactions, this study investigates how the U.S. presidential elections affect international financial markets. Using the MSCI Developed Markets (DM) and MSCI Emerging Markets (EM) indexes, the research focuses on the elections won by Joe Biden in 2020 and Donald Trump in 2024. The TVP-VAR framework is used to examine long-term dynamics, whereas an event study technique is used to investigate short-term consequences. The results of the event study show that short-term market reactions mostly stay within their confidence bands and that average abnormal returns around the election announcement and inauguration dates do not show a clear directional change. On the other hand, cumulative abnormal returns show that while DM markets performed better during the 2024 election era, EM markets outperformed DM markets during the 2020 election period. While there is no significant divergence in average abnormal returns between EM and DM markets, the divergence in cumulative abnormal returns suggests, contrary to a paradox, that markets have priced in election uncertainty and policy expectations cumulatively over time, rather than reacting on election day. According to the TVP-VAR results, the two markets are strongly interconnected and shock transmission primarily moves from DM to EM, with brief fluctuations noted during election seasons. Overall, the findings show that the effect of U.S. presidential elections on international financial markets differs depending on the political stance of the elected leader; the Trump administration tends to favor developed markets, while the Biden administration offers a more favorable pricing environment for emerging markets.

Özet

By examining both short-term price reactions and long-term dynamic interactions, this study investigates how the U.S. presidential elections affect international financial markets. Using the MSCI Developed Markets (DM) and MSCI Emerging Markets (EM) indexes, the research focuses on the elections won by Joe Biden in 2020 and Donald Trump in 2024. The TVP-VAR framework is used to examine long-term dynamics, whereas an event study technique is used to investigate short-term consequences. The results of the event study show that short-term market reactions mostly stay within their confidence bands and that average abnormal returns around the election announcement and inauguration dates do not show a clear directional change. On the other hand, cumulative abnormal returns show that while DM markets performed better during the 2024 election era, EM markets outperformed DM markets during the 2020 election period. While there is no significant divergence in average abnormal returns between EM and DM markets, the divergence in cumulative abnormal returns suggests, contrary to a paradox, that markets have priced in election uncertainty and policy expectations cumulatively over time, rather than reacting on election day. According to the TVP-VAR results, the two markets are strongly interconnected and shock transmission primarily moves from DM to EM, with brief fluctuations noted during election seasons. Overall, the findings show that the effect of U.S. presidential elections on international financial markets differs depending on the political stance of the elected leader; the Trump administration tends to favor developed markets, while the Biden administration offers a more favorable pricing environment for emerging markets.

🔖

Cite This Article

Şahin, E. (2026). The Impact of US Presidential Elections on Global Market Dynamics: An Analysis of the 2020–2024 Elections. Black Sea Journal of Public and Social Science, Sayı: 9, 32–46. https://doi.org/10.52704/bssocialscience.1839887

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