The Global Stock Market Reactions to the 2016 U.S. Presidential Election

Donald Trump’s victory in the 2016 presidential election was a political surprise to almost everyone, domestically and internationally. This paper investigates international investors’ reaction this apparent global surprise. Employing an event study methodology, we test three widely known behavioral hypotheses concerning investor unexpected news, that is, Overreaction Hypothesis (OH), Uncertain Information (UIH), Efficient Market (EMH). The results show most of indexes initially reacted unfavorably announcement win; however, subsequent stock index returns exhibit corrective upward patterns consistent with predictions OH, except for Latin American France markets. reactions other appear be favorable line prediction UIH. These findings suggest countries under study, investors could utilize contrarian strategies generate abnormal returns, as evidenced by price reversal following arrival JEL classification: G14, G15.