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Markets are the ultimate information processors. Emergent prices encapsulate the wisdom of the crowd and its views on events that could impact future value. Liquid securities, such as shares of equity in an S&P 500 component, are not directly linked to social and political events, but are affected by them. Isolating event-anticipating price changes can provide implied predictions of the events.


In this note, we apply our methodology for isolating event-anticipating price changes to the 2016 and 2020 U.S. elections. As an election approaches, companies that would be positively affected by the expected outcome are more likely to have a positive price impact compared to those that would be negatively affected by that outcome. With Skopos’ estimates of the potential impacts of a political party on every company based on the policies proposed by the parties, the spread between the returns of the long and short holdings can reveal the market’s expected outcome of the election.


A simulation of 2016 supports the hypothesis that our approach captures the intended political exposures. The Republican index outperformed the Democratic index in the lead-up to and, especially, during the aftermath of the election. Contrary to the consensus view prior to the election, these indices implied a Republican win.

Since January, we’ve been generating 2020 indices in real-time and posting their values on The Democratic index broke away as the leader on March 19th, well before there was consensus that the odds of a Democratic Presidential win were particularly high. June 8th marked a turning point, with a clear acceleration in the Democratic index and the Republic index moving into negative territory soon after.

We describe our methodology in the report linked to below.

How to derive the market's implied views
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John Nay 
Founder & CEO
Skopos Labs

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