Does the U.S. President Affect the Stock Market?

37 Pages Posted: 2 Nov 2014 Last revised: 14 Oct 2020

Date Written: October 1, 2020


In this paper, I identify a novel channel through which political beliefs affect investor behavior. Instead of considering differences of opinion between Republicans and Democrats, I analyze nonpartisan evaluations of the executive using Gallup's presidential approval ratings. I find that large net disapproval over the U.S. president's job is followed by low stock returns, especially in times of high political uncertainty and low market-wide sentiment. Notably, this mechanism explains away Santa-Clara and Valkanov's (2003) "presidential puzzle", and becomes more pronounced among politically sensitive stocks. The findings suggest that nonpartisan political beliefs have a substantial impact on asset prices.

Keywords: Politics; Approval ratings; Heterogeneous beliefs; Return predictability

JEL Classification: G12, G14, G18

Suggested Citation

Montone, Maurizio, Does the U.S. President Affect the Stock Market? (October 1, 2020). Available at SSRN: or

Maurizio Montone (Contact Author)

Utrecht University ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC

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