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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Paths to Convergence: Stock Price Behavior After Donald Trump's Election
Organization Unit
Authors
  • Alexander Wagner
  • Richard J Zeckhauser
  • Alexandre Ziegler
Language
  • English
Institution University of Zurich
Series Name Swiss Finance Institute Research Paper
Number 17-36
Date 2018
Abstract Text How do market prices adjust towards stability after a shock? Tracking individual stock prices following their dramatic shakeup after Donald Trump’s surprise election provides an answer. Prices moved overwhelmingly in the appropriate direction on the first post-election day, albeit much too little. Relative prices needed several daily iterations to converge. Three days of historically strong cross-sectional momentum were followed by a brief reversal. Prices then settled. Firm characteristics that explained first-day returns, such as corporate taxes and foreign revenues, accounted for most of the observed momentum. These findings support prominent theories of slow but predictable diffusion of information into prices.
Free access at DOI
Digital Object Identifier 10.2139/ssrn.3037023
Other Identification Number merlin-id:15250
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