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Interest Group Activity and Long-Run Stock Market Performance

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Author Info

  • Bonnie Wilson

    ()
    (Department of Economics, Saint Louis University)

  • Dennis Coates

    ()
    (Department of Economics, University of Maryland Baltimore County)

Abstract

This paper provides evidence that interest group activity is negatively related to aggregate stock market performance. In particular, the ¯ndings imply that a one percent increase in the number of interest groups in a country is associated with a reduction in average annual stock market returns of roughly 2-5%, and a reduction in the volatility of annual stock returns of roughly 6-14%. In addition, the ¯ndings indicate that many of the same fundamentals that drive economic growth also explain stock market performance.

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Bibliographic Info

Paper provided by Saint Louis University, Department of Economics in its series Working Papers with number 2007-02.

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Length: 34 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:slu:wpaper:2007-02

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Keywords: special interest groups; institutional sclerosis; stock returns; volatility;

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References

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  1. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  2. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  4. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  5. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  6. Chappell, Henry W, Jr, 1982. "Campaign Contributions and Congressional Voting: A Simultaneous Probit-Tobit Model," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 77-83, February.
  7. Sara Fisher Ellison & Catherine Wolfram, 2001. "Pharmaceutical Prices and Political Activity," NBER Working Papers 8482, National Bureau of Economic Research, Inc.
  8. Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  10. Stratmann, Thomas, 2002. "Can Special Interests Buy Congressional Votes? Evidence from Financial Services Legislation," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 345-73, October.
  11. Stratmann, Thomas, 1992. "Are Contributions Rational? Untangling Strategies of Political Action Committees," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 647-64, June.
  12. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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Cited by:
  1. Bonnie Wilson & Dennis Coates & Jac Heckelman, . "Special-Interest Groups and Growth," Working Papers 2007-01, Saint Louis University, Department of Economics.

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