Abstract

Is it 'Kerry up, Market Down' or 'Market Down, Kerry up?' Correlation versus Causation

Naveen Khanna
Michigan State University

Jennifer Marietta-Westberg
U.S. Securities and Exchange Commission

August 18, 2004

Abstract:
A negative relationship between contemporaneous stock market movements and Kerry's probability of getting elected has been documented. This raises a critical question. Does this relationship mean stock markets react negatively to Kerry's prospects, or that Kerry's prospects improve whenever the stock market dips? Establishing this causation is probably critical for both campaigns. Using lagged relationships, we show the causation is from the stock market to Kerry's prospects. This supports the popular adage "It's the economy, Stupid".

Keywords: Election, Causation, Kerry, Bush

JEL Classifications: C20, C52, D72

Working Paper Series

Date posted: September 08, 2004 ; Last revised: December 02, 2005

Suggested Citation

Khanna, Naveen and Marietta-Westberg, Jennifer, Is it 'Kerry up, Market Down' or 'Market Down, Kerry up?' Correlation versus Causation (August 18, 2004). Available at SSRN: http://ssrn.com/abstract=586703

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Contact Information

Naveen Khanna (Contact Author) Michigan State University ( email ) East Lansing, MI 48824-1121 United States 517-353-1853 (Phone) 517-432-1080 (Fax)
Jennifer Marietta-Westberg U.S. Securities and Exchange Commission ( email ) 100 F St NE Washington, DC 20549 United States

Abstract

Date posted: September 08, 2004 ; Last revised: December 02, 2005

Suggested Citation

Contact Information

Naveen Khanna (Contact Author)

Jennifer Marietta-Westberg