What Happens to Expected Stock Volatility around Election Day?
This blog post explains patterns in a forward-looking, financial market volatility measure around elections. Presidential elections create significant and widespread uncertainty about future economic policy that translates into volatility in asset prices. The prices of options can be used to measure expected volatility in the price of the underlying asset because option prices rise and fall with expected market volatility.The holder of a call option on an S&P 500 futures contract has the right to buy a share of the S&P 500 contract at a prespecified price, called a strike price, on or before a specified date. The holder of a put option has the right to sell at a strike price by a specified date.
Such measures of volatility from options prices are often called “implied volatility.” Just as one can buy shares of stocks or commodities on futures markets, one can buy a futures contract for a volatility index, called the VIX, on S&P 500 volatility on the Cboe Futures Market. The price of the VIX contract will rise or fall with the expected 30-day volatility of the stock index.There are similar volatility contracts on other assets, including bonds, foreign exchange, oil and gold. The volatilities implied by these contracts have some tendency to move together, but they can also diverge.
Tracking VIX Performance in Presidential Elections since 1988
The first figure uses implied volatility from VIX data from every election since 1988 to show how expected stock market volatility changes from two days before the election to three days after the election, when the outcome is normally known with high certainty. I’ve shown percentage changes in the VIX to compare patterns across elections. The purple lines show the movements of average and median percentage changes in the VIX across presidential elections while the gray lines show the movements for midterm elections, such as 2022. For example, the “average” purple line shows the average of the normalized VIX over the 10 presidential elections from 1988 through 2024.
The first figure shows that the VIX usually declines after any election but declines more after a presidential election than after a midterm election. That is, the purple lines drop more after election day than the gray lines. In the absence of elections or other big events, the VIX would be approximately unchanged, on average.
Average and Median Changes in the VIX around Elections

SOURCES: FRED and author’s calculations.
Why does the VIX typically decline after elections are decided? Although markets predict the outcome of many elections with high probability, there is still some surprise when the outcome is decided, because, before the final outcome, there is always some possibility either candidate could win. When an election is finally decided, this uncertainty is removed, which reduces expected volatility. Close elections produce greater uncertainty about the winner and so a greater reduction when the winner finally becomes known.
The second figure shows changes in the VIX by election year. For seven of the last 10 elections, VIX declines from the day of the election to the next day. The three largest one-day declines in the VIX occurred in the past three elections: President Donald Trump’s victories in 2016 (solid green line) and 2024 (solid purple line), and President Joe Biden’s victory in 2020 (solid orange line). There was an unusual amount of pre-election uncertainty about the outcomes of these elections and the resolution of that uncertainty might have produced the unusually large declines. For example, going into the election on Nov. 5, 2024, polls were nearly even, and betting markets showed only about a 60% chance that President Trump would win.
Changes in the VIX around Election Day, by Presidential Election Year

SOURCES: FRED and author’s calculations.
The three exceptions to postelection declines in the VIX were in 2000 (dotted purple line), 2008 (dashed orange line) and 2012 (dashed purple line), as shown in the second figure. The cause of the rise in the VIX after the 2000 election is not hard to guess: The extremely close race in Florida determined the outcome of the national presidential election by a few hundred votes, and those results would not be finalized until a Supreme Court decision on Dec. 12, 2000. This prolonged uncertainty and expectations of high volatility.
Reasons for the heightened volatility after President Barack Obama’s victories in the 2008 and 2012 elections are more difficult to determine with certainty. In early November 2008, the economy was still in the midst of the great financial crisis of 2007-2009, and the VIX was very volatile and near record levels. After the Nov. 4, 2008 election, a sequence of negative economic and corporate earnings news contributed to falling stock prices and rising volatility; the VIX tends to move inversely with stock prices. On Nov. 7, 2012, the stock market dropped sharply the day after the election, reportedly due to bad economic news from Europe, fears about political gridlock and federal budget policies.
In summary, uncertainty about the outcome of an election that will determine important economic policies tend to create high implied volatility measures, such as the VIX, prior to elections. When an election is decided, uncertainty typically decreases. Sometimes, however, unusual events or disputes about an election’s outcome can produce prolonged uncertainty and volatility.
Notes
- The holder of a call option on an S&P 500 futures contract has the right to buy a share of the S&P 500 contract at a prespecified price, called a strike price, on or before a specified date. The holder of a put option has the right to sell at a strike price by a specified date.
- There are similar volatility contracts on other assets, including bonds, foreign exchange, oil and gold. The volatilities implied by these contracts have some tendency to move together, but they can also diverge.
Citation
Christopher J. Neely, "What Happens to Expected Stock Volatility around Election Day?," St. Louis Fed On the Economy, Dec. 2, 2024.
This blog offers commentary, analysis and data from our economists and experts. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
Email Us
All other blog-related questions