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The impact of Trump’s victory on equity markets: The power of proximity

Author

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  • Ferriani, Fabrizio
  • Gazzani, Andrea
  • Taboga, Marco

Abstract

This study provides the first analytical evidence on the reaction of U.S. equity markets to Donald Trump’s victory in the 2024 Presidential election. Leveraging on a novel textual-based measure at the firm level, we uncover significant positive abnormal returns for firms aligned with Trump’s policy priorities. These firms are especially concentrated in the financial, energy, and industrial sectors. This positive equity market response is nonetheless accompanied by rising economic uncertainty, highlighting a potential disconnect between market exuberance and the macroeconomic outlook.

Suggested Citation

  • Ferriani, Fabrizio & Gazzani, Andrea & Taboga, Marco, 2025. "The impact of Trump’s victory on equity markets: The power of proximity," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000369
    DOI: 10.1016/j.econlet.2025.112199
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    References listed on IDEAS

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    1. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
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    3. Wagner, Alexander F. & Zeckhauser, Richard J. & Ziegler, Alexandre, 2018. "Company stock price reactions to the 2016 election shock: Trump, taxes, and trade," Journal of Financial Economics, Elsevier, vol. 130(2), pages 428-451.
    4. Justin Wolfers & Eric Zitzewitz, 2018. "The "Standard Error" of Event Studies: Lessons from the 2016 Election," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 584-589, May.
    5. Child, Travers Barclay & Massoud, Nadia & Schabus, Mario & Zhou, Yifan, 2021. "Surprise election for Trump connections," Journal of Financial Economics, Elsevier, vol. 140(2), pages 676-697.
    6. Erik Snowberg & Justin Wolfers & Eric Zitzewitz, 2007. "Partisan Impacts on the Economy: Evidence from Prediction Markets and Close Elections," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 807-829.
    7. Warwick J. McKibbin & Megan Hogan & Marcus Noland, 2024. "The international economic implications of a second Trump presidency," Working Paper Series WP24-20, Peterson Institute for International Economics.
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    Keywords

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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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