Political Uncertainty and the US Market Risk Premium
18 Pages Posted: 22 May 2020
Date Written: April 26, 2020
[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: Suggested Citation