Left Behind: Presidential Cycles and Partisan Gap in Stock Market Participation

Abstract

Using longitudinal U.S. household data, I document that Democrats are less likely than Republicans to participate in the stock market, controlling for education, income, wealth, and other relevant demographic characteristics. Importantly, the partisan gap in stock market participation widens sharply under Democratic presidencies, precisely when the stock market returns are substantially higher. This pattern accounts for over 40 percent of the discrepancy in wealth accumulation between Democrats and Republicans over presidential cycles. Overall, these findings underscore the interplay between individual ideology, household portfolio choice, and changing economic and political landscape.

Keywords: wealth inequality, presidential cycle, stock market participation, ideology, portfolio choice

JEL Classification: D31, G40, G51