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Political Orientation of Government and Stock Market Returns

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  • Bialkowski, Jedrzej
  • Gottschalk, Katrin
  • Wisniewski, Tomasz Piotr

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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Bibliographic Info

Paper provided by European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe in its series Working Paper Series with number 2006,9.

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Date of creation: 2006
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Handle: RePEc:zbw:euvgra:20069

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Keywords: Stock market returns; Politics; Presidential puzzle;

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References

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  1. Michael Fritsch & Andreas Stephan, 2004. "The Distribution and Heterogeneity of Technical Efficiency within Industries: An Empirical Assessment," Discussion Papers of DIW Berlin 453, DIW Berlin, German Institute for Economic Research.
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  10. Gebka, Bartosz & Serwa, Dobromil, 2006. "Are financial spillovers stable across regimes?: Evidence from the 1997 Asian crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(4), pages 301-317, October.
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Cited by:
  1. Gabriel Rodríguez & Alfredo Vargas, 2011. "Impacto de Expectativas Políticas en los Retornos del Indice General de la Bolsa de Valores de Lima," Documentos de Trabajo 2011-323, Departamento de Economía - Pontificia Universidad Católica del Perú.
  2. Tomasz Wisniewski & Geoffrey Lightfoot & Simon Lilley, 2012. "Speculating on presidential success: exploring the link between the price–earnings ratio and approval ratings," Journal of Economics and Finance, Springer, vol. 36(1), pages 106-122, January.
  3. David Le Bris, 2012. "Stock Returns, Governments and Market Foresight in France, 1871-2008," Working Papers CEB 12-007, ULB -- Universite Libre de Bruxelles.
  4. K. Arin & Alexander Molchanov & Otto Reich, 2013. "Politics, stock markets, and model uncertainty," Empirical Economics, Springer, vol. 45(1), pages 23-38, August.

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