Presentation Title

Presidential Cycles and the Stock Market Performance

Start Date

November 2016

End Date

November 2016

Location

Watkins 2240

Type of Presentation

Oral Talk

Abstract

Several studies investigating stock market returns have found that stocks perform significantly better under Democratic presidents than Republican presidents. We confirm this well-known result, but also find that the difference comes from times when the president is Republican and Congress is controlled by the Democratic Party. Under these conditions, (i.e., Republican presidents with a Democratic-controlled Congress) average excess market returns are actually negative. This finding appears to be robust as we find no significant difference between general unified and divided governments, irrespective of party. In fact, Democratic presidents with a Republican-controlled Congress produce higher excess market returns than unified Democratic or Republican governments. Our paper goes on to look at which specific sectors within the stock market explain these results after controlling for general stock market movements using the Fama-French 3 factor model. Our study provides evidence that the party in control of Congress is important when looking at stock market returns under Democratic or Republican presidents.

This document is currently not available here.

Share

COinS
 
Nov 12th, 11:00 AM Nov 12th, 11:15 AM

Presidential Cycles and the Stock Market Performance

Watkins 2240

Several studies investigating stock market returns have found that stocks perform significantly better under Democratic presidents than Republican presidents. We confirm this well-known result, but also find that the difference comes from times when the president is Republican and Congress is controlled by the Democratic Party. Under these conditions, (i.e., Republican presidents with a Democratic-controlled Congress) average excess market returns are actually negative. This finding appears to be robust as we find no significant difference between general unified and divided governments, irrespective of party. In fact, Democratic presidents with a Republican-controlled Congress produce higher excess market returns than unified Democratic or Republican governments. Our paper goes on to look at which specific sectors within the stock market explain these results after controlling for general stock market movements using the Fama-French 3 factor model. Our study provides evidence that the party in control of Congress is important when looking at stock market returns under Democratic or Republican presidents.