The Value of Political Rhetoric to Stock Market: Evidence from the United States

64 Pages Posted: 21 Dec 2017

See all articles by Xun Lei

Xun Lei

University of Northampton

Date Written: December 18, 2017


Do politicians’ communications contain new information that may be useful and valuable to investors? We conduct a textual analysis of 524 presidents’ speeches given between 1897 and 2010 in the U.S. to examine this question. Presidential speeches reflect the president’s and advisers’ views on the country’s future economy, and may also contain new information which is related to the future policy directions. Using data on the U.S. stock market, we conduct an event study analysing the market response to the linguistic characteristics of the presidents’ addresses. Controlling for speech length, important macroeconomic indicators, the results show a statistically significant and positive association between the level of commonality expressed in a president’s speech, and the abnormal returns on DJIA around the speech date. This implies that a more peaceful speech is correlated with a statistically significant increase in abnormal returns, whereas a more aggressive speech is associated with a decline in abnormal returns. These findings suggest that as well as analysing the specific content of public political information, its linguistic features and emotional tendencies are also worthy of investors’ attention.

Keywords: G12, G14, P16

JEL Classification: Political Speech, Stock Markets, Content Analysis

Suggested Citation

Lei, Xun, The Value of Political Rhetoric to Stock Market: Evidence from the United States (December 18, 2017). Available at SSRN: or

Xun Lei (Contact Author)

University of Northampton ( email )

Waterside Campus
University Drive
Northampton, NN1 5PH
United Kingdom

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