Abstract
The impact of the COVID pandemic on the 2020 election outcome is analyzed using Iowa Electronic Market data, measures of socially and economically driven market volatility, a measure of COVID severity, and selected election-related events. Building on research regarding two previous U.S. presidential elections, we find that the pandemic helped the incumbent in two ways. The largest impact supporting the incumbent came from the apparent medical severity. A secondary impact came from social and economic volatility with the surprising finding that both risks helped the incumbent relative to the challenger. However, these impacts were not adequate to overcome the relatively large advantage of the challenger.
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Data Availability
The data are available at: https://www.dropbox.com/scl/fi/8qrcibn725ibyb1wgfcy8/covid-data-4.xlsx?rlkey=x3hm2ikv5wn9dia29hlzubksw&dl=0.
Notes
Vazquez and Carvajal (2021), 6th paragraph. Covid speech: Joe Biden offers rare praise of Donald Trump | CNN Politics.
Polls taken immediately after the debate found that voters thought Clinton had won the debate by a clear margin (Wolfers and Zitzewitz, 2016, p. 1).
The foregoing discussion draws from Halcoussis et al. 2020.
Bennet, Brian (2020) https://time.com/5846449/trump-church-protests/. Gelles, Bravo, Petras (2020) https://www.usatoday.com/in-depth/graphics/2020/06/05/george-floyd-protests-trump-church-photo-curfew-park/3127684001/.
Note that the value of DEM_PRICE was always above 50 cents (during this period, the market never thought Trump was ahead). Thus, the figure is drawn with a discontinuity, with values of DEM_PRICE from 0 to 0.5 missing so that the variation in values that occurred are easier to read on the figure (as opposed to being cramped together at the top of the figure.)
Chong, Halcoussis, Phillips (2011) pp. 388 − 89. For values, see https://finance.yahoo.com/quote/%5EVIX/.
Chong, Halcoussis, Phillips (2011) pp. 389 − 91.
Halcoussis (2005) pp. 140 − 41.
Note that HAC is concerned with correcting standard errors, so there is only one set of slope estimates and goodness-of-fit measures.
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Halcoussis, D., Lowenberg, A.D. & Phillips, G.M. The COVID effect: an empirical analysis of the pandemic and the 2020 U.S. presidential election. J Econ Finan 48, 1130–1144 (2024). https://doi.org/10.1007/s12197-024-09677-8
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DOI: https://doi.org/10.1007/s12197-024-09677-8