How Did Markets Respond to Romney's Temporary Surge in Polling Data?

The floor of the New York Stock Exchange is empty of traders, Monday, Oct. 29, 2012, in New York. All major U.S. stock and op
The floor of the New York Stock Exchange is empty of traders, Monday, Oct. 29, 2012, in New York. All major U.S. stock and options exchanges will remain closed Monday with Hurricane Sandy nearing landfall on the East Coast. Trading has rarely stopped for weather. A blizzard led to a late start and an early close on Jan. 8, 1996, according to the exchange's parent company, NYSE Euronext. The NYSE shut down on Sept. 27, 1985 for Hurricane Gloria. (AP Photo/Richard Drew)

How did the market respond to Romney's temporary surge in polling data? And which sectors of the economy expect to do better if Romney is elected? For the companies included in a survey, the share prices for all large banks and large health insurance and managed care providers rose when Romney's poll numbers unexpectedly surged, while prices for the companies in the telecommunications and technology sectors declined.

Share prices were mixed for the other sectors we looked at, such as pharmaceuticals, life sciences, oil and gas, suggesting investors do not see a major difference between an Obama or Romney victory.

Sector Weighted average share price changes, Oct 2 to Oct 11 (Change, relative to the S&P 500)
Banks, investment banks 4.03%
Insurance, including health insurance 3.80%
Defense 0.39%
Pharmaceuticals 0.20%
Oil and Gas -0.74%
Agriculture life sciences -1.34%
Telecommunications -1.92%
Software, computers and Internet -2.47%


On October 3, Obama and Romney held their first debate, and Obama bombed, and did so badly, it changed the trajectory of polling data for weeks. I take this event as unanticipated by financial markets and ask the question, how did the debate change share prices in different industries? Put another way -- when Romney's election prospects improved, did investors in particular industry sectors see this as a good thing or a bad thing, relative to the market as a whole?

To find out, I looked at companies with large market capitalization values in sectors that appear to be particularly sensitive to government regulation and tax policy, and looked at closing share prices on the day before the Denver debate, and seven days after the debate, on October 11. During this period Romney's poll numbers increased significantly, and the closing price for Romney's election on Intrade betting moved from 25.5 to 37.5, an increase of 47 percent.

For the market benchmark for large companies, I use the S&P 500 index, which traded at 1445.75 on October 2, and 1432.84 on October 11, a decline of .89 percent. (For the period, the U.S. dollar decline in value against Euro, but only by .09 percent.)

The following table reports the company, market value, and the percentage change in share prices from the close of day on October 2 to October 11, relative to the overall decline in the S&P 500 of .89 percent.

The results are available here.