Stock Ownership and Congressional Elections: The Political Economy of the Mutual Fund Revolution

Abstract:     
We find that higher stock ownership rates are linked to an upward shift in the Republican share of the House popular vote since the late 1980s, consistent with theories that property interests affect voting. To proxy for discontinuous stock ownership rates, we use equity mutual fund costs, which have fallen, are negatively correlated with stock ownership rates and the Republican vote share in the long run, and help explain short-run changes along with midterm elections, economic conditions, and presidential popularity. Findings suggest that the major parties shares of the House popular vote will fluctuate around 50% until other factors trigger a political realignment.

Keywords: D72, G11

Accepted Paper Series