Election Polls, Free Trade, and the Stock Market: Evidence from the 1988 Canadian General Election.

This paper examines the effect of public opinion polls on the Toronto Stock Exchange during the campaign period of the 1988 Canadian general election. Two hypotheses are investigated: first, did polls influence the Toronto Stock Exchange and, secondly, if so, did the nature of the influence suggest that investors were reacting to expectations concerning the Canada-U.S. Free Trade Agreement? The author finds that the Toronto Stock Exchange was positively related to Conservative popularity as measured by polls, but that the differential movement of Toronto Stock Exchange subindices, while not inconsistent with a Free Trade Agreement based interpretation, does not offer much additional supporting evidence.