Political Party Affiliation of the President, Majority in Congress, and Sin Stock Returns

Financial Management, Forthcoming

Posted: 11 Jun 2016

See all articles by Sanjiv Sabherwal

Sanjiv Sabherwal

University of Texas at Arlington - Department of Finance and Real Estate

Salil K. Sarkar

University of Texas at Arlington

Mohammad Riaz Uddin

American University of Beirut - Olayan School of Business

Date Written: June 9, 2016

Abstract

We find that in contrast to the stock market, which performs better during Democratic presidencies, “sin” stocks — publicly traded producers of tobacco, alcohol, and gaming — perform better during Republican presidencies and even more so when the Republican presidency is accompanied by a Republican majority in at least one chamber of Congress. We examine whether sin firms use contributions to establish connections with politicians and find that sin firms contribute more to Republican candidates and that these contributions are greater when Republicans are in power. We also find a positive relation between political contributions and future returns. The relation is stronger for contributions to Republicans.

Keywords: Sin stocks, Democratic presidency, Republican presidency, Congress, Political contributions

JEL Classification: G1, G14, G18

Suggested Citation

Sabherwal, Sanjiv and Sarkar, Salil K. and Uddin, Mohammad Riaz, Political Party Affiliation of the President, Majority in Congress, and Sin Stock Returns (June 9, 2016). Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2793231

Sanjiv Sabherwal (Contact Author)

University of Texas at Arlington - Department of Finance and Real Estate ( email )

Box 19449 UTA
Arlington, TX 76019
United States
817-272-3705 (Phone)
817-272-2252 (Fax)

Salil K. Sarkar

University of Texas at Arlington ( email )

415 S West St Apt no 205
Arlington, TX 76013
United States

Mohammad Riaz Uddin

American University of Beirut - Olayan School of Business ( email )

Bliss Street
Beirut 1107 2020
Lebanon

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