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Are Stock Returns and Output Growth Higher Under Democrats?

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Abstract

Recent literature suggests that both stock returns and economic growth are significantly higher under Democratic presidential administrations. This is a puzzle in that persistent differences in stock returns seem unlikely in efficient markets, and it is not obvious why Democrats should do better. Often these kinds of results go away upon further analysis or more data, and this appears to be true in the present case. In this paper the sample is extended to 28 administrations, fromWilson-1 through Biden. While the mean stock return under the Democrats is higher, none of the differences in means is significant at conventional significance levels. There is\ considerable variation in the mean return across administrations, which results in lack of significance. Similarly, while the mean output growth rate under the Democrats is larger, the difference is not significant. Again, there is considerable variation in output growth across administrations. Results are also presented with the nine administrations between Hayes and Taft added, a total of 37 administrations. While the added data are likely not as good, the conclusion is the sameÑno significant differences.

Suggested Citation

  • Ray C. Fair, 2025. "Are Stock Returns and Output Growth Higher Under Democrats?," Cowles Foundation Discussion Papers 2277R1, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2277r1
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    • G01 - Financial Economics - - General - - - Financial Crises

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