Political-Cycles in US Industry Returns

Journal of International Finance and Economics, Vol. 5, No. 1

Posted: 14 Mar 2008

See all articles by Jeffrey Scott Stangl

Jeffrey Scott Stangl

Massey University - School of Economics and Finance

Ben Jacobsen

Tilburg University - TIAS School for Business and Society; Massey University

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Abstract

After correcting industry returns for general market movements and known risk factors, using either the Single-Index or the Fama-French three-factor model, we find no evidence of two well known political effects documented for general stock market returns in the United States. Contrary to the general market, adjusted industry returns do not show a significant or consistent underperformance under Republican presidents. Contrary to general market indices, adjusted industry returns do not exhibit significant or a consistent presidential election cycle effect. Our results defy popular belief that some industries perform consistently better under either Democrats or Republicans, and suggest these two political effects are market wide phenomena whose explanation should be sought at a macro economic level.

Keywords: Market efficiency, Industry returns, Presidential cycle, Political business cycle

JEL Classification: E32, G10, G12

Suggested Citation

Stangl, Jeffrey Scott and Jacobsen, Ben, Political-Cycles in US Industry Returns. Journal of International Finance and Economics, Vol. 5, No. 1. Available at SSRN: https://ssrn.com/abstract=1106023

Jeffrey Scott Stangl (Contact Author)

Massey University - School of Economics and Finance ( email )

Auckland
New Zealand
+64 414 0800 (9487) (Phone)

Ben Jacobsen

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Massey University ( email )

Auckland
New Zealand

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