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

Journal of Trading, 8 (2), 15-22

8 Pages Posted: 16 Sep 2014 Last revised: 7 Dec 2023

See all articles by Emre Kuvvet

Emre Kuvvet

Nova Southeastern University; The Independent Institute

Date Written: March 31, 2013

Abstract

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%.

Keywords: Tail risks; analysis of individual factors/risk premia; financial crises and financial market history

Suggested Citation

Kuvvet, Emre, The Impact of Political Uncertainty and Abnormal Market Conditions on Institutional Trading Behavior (March 31, 2013). Journal of Trading, 8 (2), 15-22, Available at SSRN: https://ssrn.com/abstract=2311012

Emre Kuvvet (Contact Author)

Nova Southeastern University ( email )

Ft. Lauderdale, FL 33314
United States

The Independent Institute ( email )

100 Swan Way
Oakland, CA 94621-1428
United States

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