The Presidential Puzzle: Democrats, Macroeconomic News and Equity and Bond Premiums on Announcement Days

43 Pages Posted: 13 Oct 2016 Last revised: 22 Oct 2016

See all articles by Kam Fong Chan

Kam Fong Chan

The University of Western Australia; Financial Research Network (FIRN)

Terry Marsh

Quantal International Inc.

Date Written: October 20, 2016


Recent empirical finance literature reports a sizable equity premium on two types of days. The first is under Democratic administrations. The second is on scheduled macroeconomic news announcement days. The current study unifies the two strands of literature by documenting that statistically significant and economically large announcement-day U.S. equity premiums have been limited to periods of Democratic administration between 1964 and 2015. On announcement days in Republican administrations, the estimated equity premium accompanying news announcements was negligible. The Democratic announcement-day equity premium was consistently positive in sub-periods; it showed up in international markets; it increased as election day approached; it appeared to be stronger for announcements in successive Democratic administrations; and it was bigger for medium and large market cap stocks than for small market caps stocks on announcement days, even though small stocks have in general beaten large stocks under Democratic presidents. At the same time, we show that FOMC announcements in the 1990-2015 sub-period were associated with positive equity premiums in both Democratic (Clinton and Obama) and Republican (G.W. Bush) administrations; and also that macroeconomic announcements impacted Treasury bond returns primarily in Republican administrations.

Keywords: Bond Premium; Equity Premium; Macroeconomic News Announcements; Political Regimes; Presidential Puzzle

JEL Classification: E44; G11; G12; P16

Suggested Citation

Chan, Kam Fong and Marsh, Terry, The Presidential Puzzle: Democrats, Macroeconomic News and Equity and Bond Premiums on Announcement Days (October 20, 2016). Available at SSRN: or

Kam Fong Chan (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane

Terry Marsh

Quantal International Inc. ( email )

Two Embarcadero Center
8th Floor
San Francisco, CA 94111
United States
415-744-5301 (Phone)


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