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Realized Stock-Market Volatility of the United States and the Presidential Approval Rating

Author

Listed:
  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Yuvana Jaichand

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Christian Pierdzioch

    (Department of Economics, Helmut Schmidt University, Holstenhofweg 85, P.O.B. 700822, 22008 Hamburg, Germany)

  • Renee van Eyden

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

Studying the question whether macroeconomic predictors play a role for forecasting stock market volatility has a long and significant tradition in the empirical finance literature. We go beyond earlier literature in that we study whether the presidential approval rating can be used as a single-variable substitute in place of standard macroeconomic predictors when forecasting stock-market volatility of the United States (US). Political-economy considerations imply that the presidential approval rating should reflect fluctuations in macroeconomic predictors and, hence, may absorb or even improve on the predictive value for stock-market volatility of the latter. We study whether the presidential approval rating has predictive value out-of-sample for realized stock-market volatility and, if so, which types of investors benefit from using it.

Suggested Citation

  • Rangan Gupta & Yuvana Jaichand & Christian Pierdzioch & Renee van Eyden, 2023. "Realized Stock-Market Volatility of the United States and the Presidential Approval Rating," Working Papers 202311, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202311
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    Cited by:

    1. Bouri, Elie & Gupta, Rangan & Pierdzioch, Christian, 2024. "Modeling the presidential approval ratings of the United States using machine-learning: Does climate policy uncertainty matter?," European Journal of Political Economy, Elsevier, vol. 85(C).
    2. Yuvana Jaichand & Reneé van Eyden & Rangan Gupta, 2025. "Presidential Approval Ratings and Stock Market Performance in Latin America," Scottish Journal of Political Economy, Scottish Economic Society, vol. 72(4), September.
    3. Oguzhan Cepni & Riza Demirer & Rangan Gupta & Christian Pierdzioch, 2024. "Political Geography and Stock Market Volatility: The Role of Political Alignment across Sentiment Regimes," Working Papers 202414, University of Pretoria, Department of Economics.
    4. Afees A. S alisu & Wenting Liao & Rangan Gupta & Oguzhan Cepni, 2025. "Economic Conditions and Predictability of US Stock Returns Volatility: Local Factor Versus National Factor in a GARCH‐MIDAS Model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 44(4), pages 1441-1466, July.

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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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