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Retrospective Voting Versus Risk-Aversion Voting: A Comment on Pástor and Veronesi (2020)

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Abstract

According to retrospective voting, a bad economy hurts the incumbent party and vice versa. According to risk-aversion voting as discussed in Pástor and Veronesi (2020), high risk aversion favors the Democrats over the Republicans and vice versa. If high risk aversion is associated with a bad economy, then risk-aversion voting implies that a bad economy favors the Democrats and vice versa. The two theories thus have different implications for the Democrats. This paper tests both theories under the assumption that high risk aversion is associated with a bad economy. The results provide no support for risk-aversion voting under this assumption.

Suggested Citation

  • Ray C. Fair, 2021. "Retrospective Voting Versus Risk-Aversion Voting: A Comment on Pástor and Veronesi (2020)," Cowles Foundation Discussion Papers 2279, Cowles Foundation for Research in Economics, Yale University, revised Jul 2021.
    • Handle: RePEc:cwl:cwldpp:2279r
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    References listed on IDEAS

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    1. Pedro Santa‐Clara & Rossen Valkanov, 2003. "The Presidential Puzzle: Political Cycles and the Stock Market," Journal of Finance, American Finance Association, vol. 58(5), pages 1841-1872, October.
    2. Ľuboš Pástor & Pietro Veronesi, 2020. "Political Cycles and Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 128(11), pages 4011-4045.
    3. Ray C. Fair, 2009. "Presidential and Congressional Vote‐Share Equations," American Journal of Political Science, John Wiley & Sons, vol. 53(1), pages 55-72, January.
    4. Ray C. Fair, 1996. "Econometrics and Presidential Elections," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 89-102, Summer.
    5. Ray C. Fair, 2021. "Are Stock Returns and Output Growth Higher Under Democrats?," Cowles Foundation Discussion Papers 2277, Cowles Foundation for Research in Economics, Yale University.
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    More about this item

    Keywords

    Retrospective voting; Risk-aversion voting;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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