Political orientation of government and stock market returns

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Political orientation of government and stock market returns

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Bialkowski, Jedrzej
Gottschalk, Katrin
Wisniewski, Tomasz

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Katrin Gottschalk

Abstract

Prior research documented that U.S. stock prices tend to grow faster during Democratic administrations than during Republican administrations. This letter examines whether stock returns in other countries also depend on the political orientation of the incumbents. An analysis of 24 stock markets and 173 different governments reveals that there are no statistically significant differences in returns between left-wing and right-wing executives. Consequently, international investment strategies based on the political orientation of countries' leadership are likely to be futile.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 307.

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Date of creation: Jul 2006
Date of revision: Nov 2006
Handle: RePEc:pra:mprapa:307

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-11-12 (All new papers)
NEP-CDM-2006-11-12 (Collective Decision-Making)
NEP-CFN-2006-11-12 (Corporate Finance)
NEP-PBE-2006-11-12 (Public Economics)
NEP-POL-2006-11-12 (Positive Political Economics)
NEP-RMG-2006-11-12 (Risk Management)

References listed on IDEAS
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Alesina, Alberto & Roubini, Nouriel, 1992. "Political Cycles in OECD Economies," Review of Economic Studies, Blackwell Publishing, vol. 59(4), pages 663-88, October. [Downloadable!] (restricted)
Other versions:
- Alberto Alesina & Nouriel Roubini, 1990. "Political Cycles in OECD Economies," NBER Working Papers 3478, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Alesina, Alberto F & Roubini, Nouriel, 1990. "Political Cycles in OECD Economies," CEPR Discussion Papers 470, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Pedro Santa-Clara & Rossen Valkanov, 2003. "The Presidential Puzzle: Political Cycles and the Stock Market," Journal of Finance, American Finance Association, vol. 58(5), pages 1841-1872, October. [Downloadable!] (restricted)

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