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Fermion
Topic Author
Posts: 4486
Joined: November 14th, 2002, 8:50 pm

### Will the market bounce with Obama?

It's well known that markets typically respond positively to "conservative" electoral victories and negatively to "liberal" victories. This has nothing to do with anything rational. It is merely due to an irrational confidence in market theories stemming from political ideology and is typically found to have been poor judgement when the market retirns from the political term are in.However, we are now in a highly unusual situation where those usual market theories have been found to lack any rational basis and confidence is at an all-time low. If, as some may suggest, investors who typically in the past have desired conservative victories have now realised that an Obama victory gives them more grounds for confidence than a McCain victory, we might expect to see a market surge on Wednesday, assuming Obama wins. This doesn't mean, of course, that Obama will necessarily do any better in managing the economy in the long term than McCain would (personally, I don't think Obama has the gumption to seize this historic opportunity and it will be fraud and extortion by capital as usual) -- just that that is what investors will believe.
Last edited by Fermion on November 2nd, 2008, 11:00 pm, edited 1 time in total.

farmer
Posts: 13472
Joined: December 16th, 2002, 7:09 am

### Will the market bounce with Obama?

QuoteOriginally posted by: FermionIt's well known that markets typically respond positively to "conservative" electoral victories and negatively to "liberal" victories. This has nothing to do with anything rational.I was once an option modeler like you. I remember vividly when Bill Clinton blew out healthcare and biotech stocks, and new investment, with his promise of "100 days to healthcare." I had found an option model that fit all trading going back to basically 1987. But the best stocks for options volume all went to hell at the same time in paper trading, thanks to Bill Clinton.Do you think people were irrational to fear Hillary Clinton's promise and efforts to nationalize healthcare? Many investors at that time has something that mortgage investors did not, a memory of Kennedy destroying the steel stocks in 1962.And certainly Phillip Morris and RJR lagged for years under attack from the likes of Henry Waxman. Microsoft stock has not been helped by left-wing politicians wasting their time on Windows Media Player.Maybe Barack Obama can destory the coal and electricity industry in the US entirely, as manufacturers start calling up contractors in Sri Lanka.

Posts: 23951
Joined: September 20th, 2002, 8:30 pm

### Will the market bounce with Obama?

I'm not sure that the market will move much if Obama wins because its more expected than a McCain victory. Some papers have been nattering on about 12 mo market gains being higher for Democratic win, but we also know that the global economy and financial systems aren't in the best shape right now.Of course, the VIX is still well above 50, so there's a very high chance of some sort of large price move regardless of the market's opinion of Obama. In fact, given the large amount of non-election related insanity in today's markets (e.g., abysmal ISM, EU recession, and slowing APAC), I'd bet the % of variance explained by the US election will be especially low this year (not that that will stop pundits from having opinions about the market's "vote" on the outcome).

fars1d3s
Posts: 451
Joined: August 14th, 2004, 12:28 pm

### Will the market bounce with Obama?

I just checked the prediction market on Intrade, and the odds of an Obama victory is 91% while the odds of a McCain victory is just under 9%.Anyone here feels 91% is too rich, too expensive ?

farmer
Posts: 13472
Joined: December 16th, 2002, 7:09 am

### Will the market bounce with Obama?

QuoteOriginally posted by: fars1d3sI just checked the prediction market on Intrade, and the odds of an Obama victory is 91% while the odds of a McCain victory is just under 9%. Anyone here feels 91% is too rich, too expensive ?In this situation, there is asymmetric information. Betting should be left up to people in the exit polling business, and people who make a living inside the game. Whether any of those people feel it worth their time to bet, I don't know.But I feel at this point there is too great a risk that I would be betting against someone who knows more than me, to place a bet. If McCain were at 4% or 5%, I would say there is nobody who can know that much at 8:30 AM.Let's suppose that given all I know, McCain has a 33% chance, and there is a 1 in 3 chance that someone knows more than me. I will put up $10. 2/3 of the time I will expect to get$33 back, for an expectation of $22. Plus 1/3 of the time I will get maybe$3 back, or $1, for a total of about$23. Hmmmm...The math seems to say I should bet at 10% if, given all I know, McCain has at least a 15% chance to win, and there is a 1/3 chance that someone knows more than me. But that just doesn't seem right. I can't spend any more time on it...

farmer
Posts: 13472
Joined: December 16th, 2002, 7:09 am

### Will the market bounce with Obama?

QuoteOriginally posted by: farmerThe math seems to say I should bet at 10% if, given all I know, McCain has at least a 15% chance to win, and there is a 1/3 chance that someone knows more than me. But that just doesn't seem right. I can't spend any more time on it...I found the catch. Obviously in the situation described above I am just scraping by, I am being compensated for neither my time nor my risk. I would have to think McCain's chances are 25% or 30% to start to get paid. But as my estimate, given all I know, gets further and further from the market prices, the chances that someone knows more than me also rise, partly offsetting any increased profitability.So the question is would a general instinct to avoid betting when the prices make no sense to you, be a missed opportunity in the Presidential markets on Intrade, owing to Intrade being relatively more populated with idiots than almost any other betting opportunity?

ppauper
Posts: 70239
Joined: November 15th, 2001, 1:29 pm

### Will the market bounce with Obama?

QuoteOriginally posted by: farmerI remember vividly when Bill Clinton blew out healthcare and biotech stocks, and new investment, with his promise of "100 days to healthcare." I had found an option model that fit all trading going back to basically 1987. But the best stocks for options volume all went to hell at the same time in paper trading, thanks to Bill Clinton.Do you think people were irrational to fear Hillary Clinton's promise and efforts to nationalize healthcare?if you read the late Barbara Olsen's biography of hillary, there's a fascinating discussion of how hillary had money in hedgefunds which were shorting healthcare stocks at the same time she was trying to organize hillarycare.She made a lot of money.....my guess is that the markets have already priced in the possibility of hussein winning, which explains the cataclysmic slides of the past few weeks, and if McCain/Palin prevail, we'll see a 1000 point surge on Weds

gardener3
Posts: 1496
Joined: April 5th, 2004, 3:25 pm

### Will the market bounce with Obama?

QuoteOriginally posted by: ppauperQuoteOriginally posted by: farmerI remember vividly when Bill Clinton blew out healthcare and biotech stocks, and new investment, with his promise of "100 days to healthcare." I had found an option model that fit all trading going back to basically 1987. But the best stocks for options volume all went to hell at the same time in paper trading, thanks to Bill Clinton.Do you think people were irrational to fear Hillary Clinton's promise and efforts to nationalize healthcare?if you read the late Barbara Olsen's biography of hillary, there's a fascinating discussion of how hillary had money in hedgefunds which were shorting healthcare stocks at the same time she was trying to organize hillarycare.She made a lot of money.....my guess is that the markets have already priced in the possibility of hussein winning, which explains the cataclysmic slides of the past few weeks, and if McCain/Palin prevail, we'll see a 1000 point surge on WedsYou are attributing the drop in October (worst in 60 years) to Obama's surge in polls? Do you have any other brilliant financial insights?

Fermion
Topic Author
Posts: 4486
Joined: November 14th, 2002, 8:50 pm

### Will the market bounce with Obama?

Looks like the bounce has already started....
Last edited by Fermion on November 3rd, 2008, 11:00 pm, edited 1 time in total.

ppauper
Posts: 70239
Joined: November 15th, 2001, 1:29 pm

### Will the market bounce with Obama?

QuoteOriginally posted by: gardener3QuoteOriginally posted by: ppauperQuoteOriginally posted by: farmerI remember vividly when Bill Clinton blew out healthcare and biotech stocks, and new investment, with his promise of "100 days to healthcare." I had found an option model that fit all trading going back to basically 1987. But the best stocks for options volume all went to hell at the same time in paper trading, thanks to Bill Clinton.Do you think people were irrational to fear Hillary Clinton's promise and efforts to nationalize healthcare?if you read the late Barbara Olsen's biography of hillary, there's a fascinating discussion of how hillary had money in hedgefunds which were shorting healthcare stocks at the same time she was trying to organize hillarycare.She made a lot of money.....my guess is that the markets have already priced in the possibility of hussein winning, which explains the cataclysmic slides of the past few weeks, and if McCain/Palin prevail, we'll see a 1000 point surge on WedsYou are attributing the drop in October (worst in 60 years) to Obama's surge in polls? it makes as much sense as anything else we've heard.We were told that one drop was due to the "bailout package" being rejected by Congress,yet a few days later Congress passed v2.0 of the bailout and the market dropped even more

ppauper
Posts: 70239
Joined: November 15th, 2001, 1:29 pm

### Will the market bounce with Obama?

ppauper
Posts: 70239
Joined: November 15th, 2001, 1:29 pm

### Will the market bounce with Obama?

Fermion
Topic Author
Posts: 4486
Joined: November 14th, 2002, 8:50 pm

### Will the market bounce with Obama?

aiQUANT
Posts: 91
Joined: June 4th, 2008, 6:20 pm

### Will the market bounce with Obama?

certainly the company contracted for building the wall across the american/mexican border will rise.

ppauper
Posts: 70239
Joined: November 15th, 2001, 1:29 pm

### Will the market bounce with Obama?

QuoteOriginally posted by: aiQUANTcertainly the company contracted for building the wall across the american/mexican border will rise.?you think obama is going to crack down on illegals ?the opposite is true: expect another amnestyBush was only forced into action by a rightwing rebellion

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