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Predicting the presidential election cycle in US stock prices: guinea pigs versus the pros

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  • Manfred Gartner

Abstract

The notion that US stock prices follow a pattern that is synchronized with presidential elections has been discussed among financial investors for a long time. Academic work exists that supports this idea, quantifies the pattern and has demonstrated its robustness over several decades and across parties in power. This article takes the existence and robustness of this presidential election cycle for granted and asks whether individuals exploit it when they predict stock prices. It considers and contrasts two types of such forecasts: Those made by professionals included in the Livingston survey and those made by students in a laboratory experiment. A key result is that neither group fares particularly well, though participants in the experiment outperformed the professionals.

Suggested Citation

  • Manfred Gartner, 2010. "Predicting the presidential election cycle in US stock prices: guinea pigs versus the pros," Applied Economics Letters, Taylor & Francis Journals, vol. 17(18), pages 1759-1765.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:18:p:1759-1765
    DOI: 10.1080/13504850903299602
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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