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Stock market political cycles in a small, two-party democracy

Author

Listed:
  • Jared Cahan
  • Christopher Malone
  • John Powell
  • Udomsak Wong Choti

Abstract

Real stock market returns in New Zealand are lower when the left-leaning Labour party is in power than under National party governments, in contrast to the USA where returns are higher under Democratic presidents than under right-leaning Republicans. The difference in real stock market returns between National and Labour is not reversed even when account is taken of the effect of the US political cycle and returns on New Zealand. The results of the study therefore suggest that the presidential puzzle does not transfer directly to other countries with two similar party democracies.

Suggested Citation

  • Jared Cahan & Christopher Malone & John Powell & Udomsak Wong Choti, 2005. "Stock market political cycles in a small, two-party democracy," Applied Economics Letters, Taylor & Francis Journals, vol. 12(12), pages 735-740.
    • Handle: RePEc:taf:apeclt:v:12:y:2005:i:12:p:735-740
    DOI: 10.1080/13504850500192895
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    Citations

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    Cited by:

    1. Yong-Huang Lin & Yun-Wu Wu & Jer-Shiou Chiou, 2008. "The impacts of sociopolitical instability on construction dimension," Applied Economics Letters, Taylor & Francis Journals, vol. 15(15), pages 1207-1211.
    2. Wisniewski, Tomasz Piotr & Lambe, Brendan John, 2015. "Does economic policy uncertainty drive CDS spreads?," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 447-458.
    3. Taylor, Mark & Filippou, Ilias & Gozluklu, Arie & Nguyen, My, 2020. "U.S. Populist Rhetoric and Currency Returns," CEPR Discussion Papers 15054, C.E.P.R. Discussion Papers.
    4. Anderson, Hamish D. & Malone, Christopher B. & Marshall, Ben R., 2008. "Investment returns under right- and left-wing governments in Australasia," Pacific-Basin Finance Journal, Elsevier, vol. 16(3), pages 252-267, June.
    5. Wisniewski, Tomasz Piotr, 2016. "Is there a link between politics and stock returns? A literature survey," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 15-23.
    6. Faraji, Omid & Kashanipour, Mohammad & MohammadRezaei, Fakhroddin & Ahmed, Kamran & Vatanparast, Nader, 2020. "Political connections, political cycles and stock returns: Evidence from Iran," Emerging Markets Review, Elsevier, vol. 45(C).
    7. Yaser Abolghasemi & Stanko Dimitrov, 2021. "Determining the causality between U.S. presidential prediction markets and global financial markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4534-4556, July.
    8. Civilize, Sireethorn & Wongchoti, Udomsak & Young, Martin, 2015. "Military regimes and stock market performance," Emerging Markets Review, Elsevier, vol. 22(C), pages 76-95.
    9. Wisniewski, Tomasz P. & Pathan, Saima K., 2014. "Political environment and foreign direct investment: Evidence from OECD countries," European Journal of Political Economy, Elsevier, vol. 36(C), pages 13-23.
    10. Andrew C. Worthington, 2009. "Political Cycles in the Australian Stock Market since Federation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(4), pages 397-409, December.

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