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

45 Pages Posted: 2 Nov 2014 Last revised: 1 Dec 2019

Date Written: November 1, 2018


In this paper, I identify a novel channel through which political opinions affect asset prices. Rather than look at differences in expectations between Republicans and Democrats, I analyze political beliefs from an aggregate perspective. Using Gallup's polling data, I find that higher disapproval over the U.S. president's job is associated with an increase in trading volume and short-selling activity, and followed by lower stock returns. The effect is especially large in times of low sentiment and high uncertainty, and explains away Santa-Clara and Valkanov's (2003) "presidential puzzle". Notably, the results are particularly strong among stocks regarded as politically sensitive.

Keywords: Politics; Approval ratings; Short-sales constraints; Return predictability

JEL Classification: G12, G14, G18

Suggested Citation

Montone, Maurizio, Does the U.S. President Affect the Stock Market? (November 1, 2018). 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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