What to Expect When You're Electing

32 Pages Posted: 20 Oct 2012  

Scott Beyer

Univeristy of Wisconsin Oshkosh

Luis García-Feijóo

Florida Atlantic University - Department of Finance

Gerald R. Jensen

Northern Illinois University

Robert R. Johnson

Creighton University - College of Business Administration

Date Written: October 12, 2012

Abstract

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.

Keywords: Monetary Policy, Political Policy

Suggested Citation

Beyer, Scott and García-Feijóo, Luis and Jensen, Gerald R. and Johnson, Robert R., What to Expect When You're Electing (October 12, 2012). Available at SSRN: https://ssrn.com/abstract=2164523 or http://dx.doi.org/10.2139/ssrn.2164523

Scott Beyer (Contact Author)

Univeristy of Wisconsin Oshkosh ( email )

800 Algoma Blvd
Oshkosh, WI WI 54901
United States
9204247194 (Phone)

Luis Garcia-Feijoo

Florida Atlantic University - Department of Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States
954-236-1239 (Phone)

Gerald Jensen

Northern Illinois University ( email )

Barsema Hall
Finance Department
DeKalb, IL 60115
United States
815-753-6399 (Phone)

Robert R. Johnson

Creighton University - College of Business Administration ( email )

United States
4342492805 (Phone)

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