Populism and Financial Markets

We replicate and extend Stöckl & Rode (2021, JEBO) on the financial market consequences of populist electoral success, using updated data vintages and an improved measurement strategy. Leveraging option-implied volatility differences spanning national elections across Western democracies, we document a persistent asymmetry: right-wing populist victories reduce option-implied risk assessments, while left-wing populist success has mixed or null effects. We further decompose the populism effect by period and document an IVD-to-IVSD migration pattern in the data, and we provide a state-dependent analysis showing that financial market reactions to populist outcomes depend on the pre-election VIX regime.

Forthcoming in the Handbook on Economic Populism (Edward Elgar)