What to Expect When You're Electing
Univeristy of Wisconsin Oshkosh
Florida Atlantic University - Department of Finance
Gerald R. Jensen
Northern Illinois University
Robert R. Johnson
Creighton University - College of Business Administration
October 12, 2012
This paper analyzes security-market returns relative to the political party of the president, the Federal Reserve’s monetary policy, the year of the president’s term, and the state of political gridlock. Contrary to prior studies, which evaluated the influences separately, we jointly evaluate these variables. Our analysis supports the notion that security returns are significantly related to shifts in Fed monetary policy, political gridlock and the year of the presidential term; however, returns are generally invariant to the president’s political party affiliation. Overall, our findings suggest that investors should focus less attention on the party of the president and instead more closely monitor Fed actions. Furthermore, it appears that political harmony should be welcomed by equity investors, but not debt investors. Finally, regardless of the political outcome, if the past serves as a guide, investors may have to wait until year three of the next presidential term to enjoy the fruits of the current political season.
Number of Pages in PDF File: 32
Keywords: Monetary Policy, Political Policyworking papers series
Date posted: October 20, 2012
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.360 seconds