Are Policy Platforms Capitalized into Equity Prices? Evidence from the Bush/Gore 2000 Presidential Election
AbstractThis paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under Bush or Gore platforms during the 2000 U.S. Presidential Election. Two sources of daily data during the six months leading up to the election are incorporated: firm-specific equity returns and the probability of a Bush victory as implied by prices from the Iowa electronic market. For this group of politically-sensitive firms, the daily baseline estimates demonstrate that platforms are capitalized into equity prices: under a Bush administration, relative to a counterfactual Gore administration, Bush-favored firms are worth 3 percent more and Gore-favored firms are worth 6 percent less, implying a statistically significant differential return of 9 percent. The most sensitive sectors include tobacco, worth 13 percent more under a favorable Bush administration, Microsoft competitors, worth 15 percent less under an unfavorable Bush administration, and alternative energy companies, worth 16 percent less under an unfavorable Bush administration. A corresponding analysis of campaign contributions, which allows for heterogeneity in the importance of policy platforms to the firms, supports the baseline estimates. These results are then compared with results from a more traditional event study based upon the Florida recount.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10333.
Date of creation: Mar 2004
Date of revision:
Publication status: published as Knight, Brian. "Are Policy Platforms Capitalized Into Equity Prices? Evidence From The Bush/Gore 2000 Presidential Election," Journal of Public Economics, 2006, v90(4-5,May), 751-773.
Note: AP PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Knight*, Brian, 2007. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 389-409, February.
- Knight, Brian, 2006. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 751-773, May.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-07 (All new papers)
- NEP-FMK-2004-03-07 (Financial Markets)
- NEP-MAC-2004-03-07 (Macroeconomics)
- NEP-MIC-2004-03-07 (Microeconomics)
- NEP-PBE-2004-03-07 (Public Economics)
- NEP-POL-2004-03-07 (Positive Political Economics)
- NEP-RMG-2004-03-07 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
- Charles F. Manski, 2004.
"Interpreting the Predictions of Prediction Markets,"
NBER Working Papers
10359, National Bureau of Economic Research, Inc.
- Manski, Charles F., 2006. "Interpreting the predictions of prediction markets," Economics Letters, Elsevier, vol. 91(3), pages 425-429, June.
- Mattozzi, Andrea., 2005.
"Policy uncertainty, electoral securities and redistribution,"
1229, California Institute of Technology, Division of the Humanities and Social Sciences.
- Andrea Mattozzi, 2010. "Policy Uncertainty, Electoral Securities, And Redistribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 45-71, 02.
- Andrea Mattozzi, 2003. "Policy Uncertainty, Electoral Securities and Redistribution," Levine's Working Paper Archive 666156000000000260, David K. Levine.
- Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, Fall.
- Todd Sinai & Joseph Gyourko, .
"The Asset Price Incidence of Capital Gains Taxes: Evidence from the Taxpayer Relief Act of 1997 and Publicly-Traded Real Estate Firms,"
Zell/Lurie Center Working Papers
311, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
- Sinai, Todd & Gyourko, Joseph, 2004. "The asset price incidence of capital gains taxes: evidence from the Taxpayer Relief Act of 1997 and publicly-traded real estate firms," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1543-1565, July.
- Todd Sinai & Joseph Gyourko, 2000. "The Asset Price Incidence of Capital Gains Taxes: Evidence from the Taxpayer Relief Act of 1997 and Publicly-Traded Real Estate Firms," NBER Working Papers 7893, National Bureau of Economic Research, Inc.
- Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
- Gene Grossman & Elhanan Helpman, 1994.
"Electoral Competition and Special Interest Politics,"
NBER Working Papers
4877, National Bureau of Economic Research, Inc.
- Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
- Forsythe, Robert & Forrest Nelson & George R. Neumann & Jack Wright, 1992. "Anatomy of an Experimental Political Stock Market," American Economic Review, American Economic Association, vol. 82(5), pages 1142-61, December.
- Seema Jayachandran, 2004.
"The Jeffords Effect,"
UCLA Economics Online Papers
297, UCLA Department of Economics.
- David M. Cutler & James M. Poterba & Lawrence H. Summers, 1988.
"What Moves Stock Prices?,"
NBER Working Papers
2538, National Bureau of Economic Research, Inc.
- Michael C. Herron & James Lavin & Donald Cram & Jay Silver, 1999. "Measurement of Political Effects in the United States Economy: A Study of the 1992 Presidential Election," Economics and Politics, Wiley Blackwell, vol. 11(1), pages 51-81, 03.
- Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
- Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 105-130, Winter.
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
- Mark H. Lang & Douglas A. Shackelford, 1999.
"Capitalization of Capital Gains Taxes: Evidence from Stock Price Reactions to the 1997 Rate Reduction,"
NBER Working Papers
6885, National Bureau of Economic Research, Inc.
- Lang, Mark H. & Shackelford, Douglas A., 2000. "Capitalization of capital gains taxes: evidence from stock price reactions to the 1997 rate reduction," Journal of Public Economics, Elsevier, vol. 76(1), pages 69-85, April.
- Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
- Andrew Leigh & Justin Wolfers & Eric Zitzewitz, 2003.
"What Do Financial Markets Think of War in Iraq?,"
NBER Working Papers
9587, National Bureau of Economic Research, Inc.
- David K. Musto & Bilge Yilmaz, 2003. "Trading and Voting," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 990-1003, October.
- Slemrod, Joel & Greimel, Timothy, 1999. "Did Steve Forbes scare the US municipal bond market?," Journal of Public Economics, Elsevier, vol. 74(1), pages 81-96, October.
- Cutler, David M, 1988. "Tax Reform and the Stock Market: An Asset Price Approach," American Economic Review, American Economic Association, vol. 78(5), pages 1107-17, December.
- Berg, Joyce & Forsythe, Robert & Nelson, Forrest & Rietz, Thomas, 2008. "Results from a Dozen Years of Election Futures Markets Research," Handbook of Experimental Economics Results, Elsevier.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-141, Spring.
RePEc Biblio mentionsAs found on the RePEc Biblio, the curated bibliography for Economics:CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.