Midterm Elections’ Stock Market Surge – An Unintentional Gift From US Politicians

https://jwm.pm-research.com/content/21/4/76

Posted: 12 Oct 2018

See all articles by Jedrzej Pawel Bialkowski

Jedrzej Pawel Bialkowski

University of Canterbury - Department of Economics and Finance

Aynaz Nahavandi

University of Canterbury - Economics and Finance

Date Written: July 14, 2018

Abstract

The paper provides evidence for the existence of a midterm election effect. By examining the quarterly total returns on the S&P 500 Index between 1954 and 2017, we show that, nine times out of 10, the index has been positive in the fourth quarter of a midterm election year and the following two quarters. This compounds to nearly 25% in those three quarters. Neither changes in the monetary nor the fiscal policies were able to explain the effect. The authors show that the known third year of a presidential term effect is weaker than the examined midterm election effect.

Keywords: Market Efficiency, US Midterm Election Effect, Political Uncertainty, Presidential Cycle, Political Business Cycle

JEL Classification: G11, G12, G14,

Suggested Citation

Bialkowski, Jedrzej Pawel and Nahavandi, Aynaz, Midterm Elections’ Stock Market Surge – An Unintentional Gift From US Politicians (July 14, 2018). https://jwm.pm-research.com/content/21/4/76, Available at SSRN: https://ssrn.com/abstract=3253726 or http://dx.doi.org/10.2139/ssrn.3253726

Jedrzej Pawel Bialkowski (Contact Author)

University of Canterbury - Department of Economics and Finance ( email )

Private Bag 4800
Christchurch, 8140
New Zealand

Aynaz Nahavandi

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

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