Stock Returns, Governments and Market Foresight in France, 1871-2008
This paper analyzes the historical relationship between the political coloration of the government and stock market performance in France between 1871 and 2008. The Left-wing/Right-wing dichotomy, which is ubiquitous in French political discourse, is utilized in order to build a comparative analytical framework. During the 150 months characterized by the appointment of a new government regardless the coloration, we find that the monthly stock return is, on average, three times higher than for other months. The market appreciates in value with all new governments. However, in the long run, the real return of French stocks averages 4.40% per year under Left-wing versus 0.11% under Right-wing governments. This difference, although statistically robust, is not the result of added compensation for higher risk investments, nor is it driven by short special periods. The existence of a more favorable macroeconomic context during the rule of Left-wing governments only explains one third of this difference. A large part of the difference is concentrated during the three months prior to a coloration change. Assuming that the market anticipates coloration changes three months in advance, we move the boundaries: the difference in stock returns becomes insignificant.
|Date of creation:||Feb 2012|
|Date of revision:|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles|
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Brown, Keith C. & Harlow, W. V. & Tinic, Seha M., 1988. "Risk aversion, uncertain information, and market efficiency," Journal of Financial Economics, Elsevier, vol. 22(2), pages 355-385, December.
- Jedrzej Bialkowski & Katrin Gottschalk & Tomasz Piotr Wisniewski, 2007.
"Political orientation of government and stock market returns,"
Applied Financial Economics Letters,
Taylor and Francis Journals, vol. 3(4), pages 269-273.
- Bialkowski, Jedrzej & Gottschalk, Katrin & Wisniewski, Tomasz Piotr, 2006. "Political Orientation of Government and Stock Market Returns," Working Paper Series 2006,9, European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe.
- Bialkowski, Jedrzej & Gottschalk, Katrin & Wisniewski, Tomasz, 2006. "Political orientation of government and stock market returns," MPRA Paper 307, University Library of Munich, Germany, revised Nov 2006.
- David Le Bris & Pierre-Cyrille Hautcoeur, 2009. "A Challenge to Triumphant Optimists? A New Index for the Paris Stock-Exchange (1854-2007)," Working Papers 09-02, Association Française de Cliométrie (AFC).
- Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
- Fama, Eugene F, 1991. " Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-617, December.
- William N. Goetzmann & ROGER G. IBBOTSON & LIANG PENG, 2004.
"A New Historical Database For The NYSE 1815 To 1925: Performance And Predictability,"
Yale School of Management Working Papers
ysm5, Yale School of Management.
- Goetzmann, William N. & Ibbotson, Roger G. & Peng, Liang, 2001. "A new historical database for the NYSE 1815 to 1925: Performance and predictability," Journal of Financial Markets, Elsevier, vol. 4(1), pages 1-32, January.
- William N. Goetzmann & Roger G. Ibbotson & Liang Peng, 2000. "A New Historical Database For The NYSE 1815 To 1925: Performance And Predictability," Yale School of Management Working Papers ysm154, Yale School of Management.
- 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.
- Jörg Döpke & Christian Pierdzioch, 2004.
"Politics and the Stock Market ; Evidence from Germany,"
Kiel Working Papers
1203, Kiel Institute for the World Economy.
- Dopke, Jorg & Pierdzioch, Christian, 2006. "Politics and the stock market: Evidence from Germany," European Journal of Political Economy, Elsevier, vol. 22(4), pages 925-943, December.
- Pantzalis, Christos & Stangeland, David A. & Turtle, Harry J., 2000. "Political elections and the resolution of uncertainty: The international evidence," Journal of Banking & Finance, Elsevier, vol. 24(10), pages 1575-1604, October.
- Riley, William B. & Luksetich, William A., 1980. "The Market Prefers Republicans: Myth or Reality," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(03), pages 541-560, September.
- Wayne E. Ferson & Sergei Sarkissian & Timothy Simin, 2002.
"Spurious Regressions in Financial Economics?,"
NBER Working Papers
9143, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/109574. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.