Abstract

http://ssrn.com/abstract=687211
 
 

References (26)



 
 

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Congress and the Stock Market


Michael F. Ferguson


University of Cincinnati - Department of Finance - Real Estate

Hugh Douglas Witte


University of Missouri at Columbia - Department of Finance

March 13, 2006



Abstract:     
We find a strong link between Congressional activity and stock market returns that persists even after controlling for known daily return anomalies. Stock returns are lower and volatility is higher when Congress is in session. This "Congressional Effect" can be quite large - more than 90% of the capital gains over the life of the DJIA have come on days when Congress is out of session. The Effect varies systematically with the public's opinion of Congress: returns are lower and volatility higher when a relatively unpopular Congress is active. Public opinion appears to play a fundamental role in market prices. This is consistent with a mood-based explanation that sees Congress as 'depressing' the average investor. Alternatively, our results can also be reconciled with rational explanations that view Congressional activity as a proxy for regulatory uncertainty or rent-seeking behavior.

Number of Pages in PDF File: 39

Keywords: stock market, Congress, anomalies, behavioral finance

JEL Classification: G1, G10, G14, G18

working papers series





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Date posted: March 21, 2005  

Suggested Citation

Ferguson, Michael F. and Witte, Hugh Douglas, Congress and the Stock Market (March 13, 2006). Available at SSRN: http://ssrn.com/abstract=687211 or http://dx.doi.org/10.2139/ssrn.687211

Contact Information

Michael F. Ferguson (Contact Author)
University of Cincinnati - Department of Finance - Real Estate ( email )
College of Business Administration
Cincinnati, OH 45221
United States
513-556-7080 (Phone)
Hugh Douglas Witte
University of Missouri at Columbia - Department of Finance ( email )
403 Cornell Hall
Columbia, MO 65211
United States
573-882-2371 (Phone)
HOME PAGE: http://business.missouri.edu/People/FacStaff/finfac/index.htm#fin_witte
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