IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v247y2025ics0165176525000369.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176525000369
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2025.112199?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Tarek A Hassan & Stephan Hollander & Laurence van Lent & Ahmed Tahoun, 2019. "Firm-Level Political Risk: Measurement and Effects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 2135-2202.
    4. 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.
    5. 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.
    6. 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.
    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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Hanke, Michael & Stöckl, Sebastian & Weissensteiner, Alex, 2020. "Political event portfolios," Journal of Banking & Finance, Elsevier, vol. 118(C).
    3. Fetzer, Thiemo & Yotzov, Ivan, 2023. "(How) Do electoral surprises drive business cycles? Evidence from a new dataset," The Warwick Economics Research Paper Series (TWERPS) 1468, University of Warwick, Department of Economics.
    4. Armstrong, Daphne M. & Glaeser, Stephen & Hoopes, Jeffrey L., 2025. "Measuring firm exposure to government agencies," Journal of Accounting and Economics, Elsevier, vol. 79(1).
    5. Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2017. "Paths to Convergence: Stock Price Behavior After Donald Trump's Election," Swiss Finance Institute Research Paper Series 17-36, Swiss Finance Institute, revised Feb 2018.
    6. Cazals, Antoine & Léon, Florian, 2023. "Perception of political instability in election periods: Evidence from African firms," Journal of Comparative Economics, Elsevier, vol. 51(1), pages 259-276.
    7. Chan, Kam Fong & Gray, Philip & Gray, Stephen & Zhong, Angel, 2020. "Political uncertainty, market anomalies and Presidential honeymoons," Journal of Banking & Finance, Elsevier, vol. 113(C).
    8. Chatjuthamard, Pattanaporn & Mook Lee, Sang & Kim, Young S. & Jiraporn, Pornsit & Potosky, Denise, 2024. "Climate change and shareholder value: Evidence from textual analysis and Trump’s unexpected victory," Journal of Business Research, Elsevier, vol. 180(C).
    9. Hacıoğlu-Hoke, Sinem, 2024. "Macroeconomic effects of political risk shocks," Economics Letters, Elsevier, vol. 242(C).
    10. Po‐Hsuan Hsu & Kai Li & Chi‐Yang Tsou, 2023. "The Pollution Premium," Journal of Finance, American Finance Association, vol. 78(3), pages 1343-1392, June.
    11. Herold, Michael & Kanz, Andreas & Muck, Matthias, 2021. "Do opinion polls move stock prices? Evidence from the US presidential election in 2016," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 665-690.
    12. Fałkowski, Jan & Kurek, Przemysław J. & Lewkowicz, Jacek, 2024. "Politically induced uncertainty and asset-market valuation," European Journal of Political Economy, Elsevier, vol. 84(C).
    13. M. Blomkvist & E. Liljeblom & A. Löflund & E. Redor, 2024. "Political Connections and Shareholder Support," Post-Print hal-04662505, HAL.
    14. Hu, Yi & Yin, Chao, 2025. "Reprint of: Political uncertainty, corporate social responsibility, and firm performance," The British Accounting Review, Elsevier, vol. 57(1).
    15. Meng, Yun & Pantzalis, Christos & Park, Jung Chul, 2023. "Why corporate political geography matters for stock returns," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 71-96.
    16. Chan, Kam Fong & Smales, Lee A., 2025. "U.S. Presidential news coverage: Risk, uncertainty and stocks," International Review of Economics & Finance, Elsevier, vol. 98(C).
    17. Diakonova, Marina & Molina, Luis & Mueller, Hannes & Pérez, Javier J. & Rauh, Christopher, 2024. "The information content of conflict, social unrest and policy uncertainty measures for macroeconomic forecasting," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(4).
    18. Carvalho, Augusto & Guimaraes, Bernardo, 2018. "State-controlled companies and political risk: Evidence from the 2014 Brazilian election," Journal of Public Economics, Elsevier, vol. 159(C), pages 66-78.
    19. El Ghoul, Sadok & Guedhami, Omrane & Mansi, Sattar & Wang, He (Helen), 2023. "Economic policy uncertainty, institutional environments, and corporate cash holdings," Research in International Business and Finance, Elsevier, vol. 65(C).
    20. Chris Florackis & Christodoulos Louca & Roni Michaely & Michael Weber, 2023. "Cybersecurity Risk," The Review of Financial Studies, Society for Financial Studies, vol. 36(1), pages 351-407.

    More about this item

    Keywords

    Equity markets; Donald Trump; Abnormal returns; Event study; US 2024 Presidential election;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000369. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.