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Presidential cycles in international equity flows and returns

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  • Chrétien, Stéphane
  • Fu, Hsuan

Abstract

This paper investigates to what extent the U.S. presidential cycle can spillover across borders and affect the actions of global investors. Using data from 2000 to 2022 on G10 countries, we show that, on average, the annualized equity premium is 6.1% higher and the net monthly percentage equity fund flows are 0.3% higher in Democratic versus Republican presidencies. These findings reinforce the hypothesis that global investors tend to be more optimistic, instead of more risk averse, in Democratic presidencies. However, we find no significant presidential cycle effect in equity flows from U.S. funds.

Suggested Citation

  • Chrétien, Stéphane & Fu, Hsuan, 2023. "Presidential cycles in international equity flows and returns," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007929
    DOI: 10.1016/j.frl.2022.103616
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    References listed on IDEAS

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    More about this item

    Keywords

    Political cycles; International stock markets; Equity risk premium; Investment fund flows; Cross-border flows; Presidential party affiliation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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