Political Uncertainty and the US Market Risk Premium

18 Pages Posted: 22 May 2020

Date Written: April 26, 2020

Abstract

[enter Abstract Body]Using a theoretical model and a vector autoregression, I examine the relationship between the market risk premium and political uncertainty in the United States from Feb. 1985 to Feb. 2019. I find that political uncertainty has a small positive, delayed effect on the market risk premium. The market risk premium, on the other hand, has a large permanent, negative effect on political uncertainty.

Keywords: : Political uncertainty, Government Policy, risk premia

JEL Classification: G12, G18

Suggested Citation

Gregory, Richard Paul, Political Uncertainty and the US Market Risk Premium (April 26, 2020). Available at SSRN: https://ssrn.com/abstract=3585738 or http://dx.doi.org/10.2139/ssrn.3585738

Richard Paul Gregory (Contact Author)

East Tennessee State University ( email )

Department of Economics and Finance
Johnson City, TN 37614
United States

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