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Is There a Presidential Election Cycle in Firm Financials?


  • Ray R. Sturm

    () (Department of Finance, College of Business Administration, University of Central Florida, P. O. Box 161400, Orlando, FL 32816, USA)


A presidential election cycle (PEC) in stock returns has been well-documented in the academic literature. Prior studies have pointed to economic policy as a cause of the phenomenon apparently overlooking the role of firm value. This study examines changes in firm valuation as the cause. Using firm-level data, this study finds a convincing cycle in firms’ book-to-market (BE/ME) ratios, earnings yield and most notable, in log-changes in annual revenue. In particular, log-changes in revenue during the election year appear to be instrumental in the previously document PEC in stock returns.

Suggested Citation

  • Ray R. Sturm, 2016. "Is There a Presidential Election Cycle in Firm Financials?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-18, June.
  • Handle: RePEc:wsi:rpbfmp:v:19:y:2016:i:02:n:s0219091516500107
    DOI: 10.1142/S0219091516500107

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    References listed on IDEAS

    1. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. Ray Sturm, 2009. "The 'other' January effect and the presidential election cycle," Applied Financial Economics, Taylor & Francis Journals, vol. 19(17), pages 1355-1363.
    3. Gili Yen & Cheng-few Lee, 2008. "Efficient Market Hypothesis (EMH): Past, Present and Future," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(02), pages 305-329.
    4. Booth, James R. & Booth, Lena Chua, 2003. "Is presidential cycle in security returns merely a reflection of business conditions?," Review of Financial Economics, Elsevier, vol. 12(2), pages 131-159.
    5. Ron Bird & Daniel Choi & Danny Yeung, 2014. "Market uncertainty, market sentiment, and the post-earnings announcement drift," Review of Quantitative Finance and Accounting, Springer, vol. 43(1), pages 45-73, July.
    6. Xiaofeng Zhao & Kartono Liano & William G. Hardin, 2004. "Presidential Election Cycles and the Turn‐of‐the‐Month Effect," Social Science Quarterly, Southwestern Social Science Association, vol. 85(4), pages 958-973, December.
    7. Ray Sturm, 2013. "Economic policy and the presidential election cycle in stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(2), pages 200-215, April.
    8. Martin T. Bohl & Jörg Döpke & Christian Pierdzioch, 2008. "Real‐Time Forecasting and Political Stock Market Anomalies: Evidence for the United States," The Financial Review, Eastern Finance Association, vol. 43(3), pages 323-335, August.
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