The Impact of Political Variables on Stock Returns and Investor Sentiment

Journal of Business and Behavioural Sciences, 2014

18 Pages Posted: 17 Jul 2020

See all articles by Daniel Perez-Liston

Daniel Perez-Liston

University of Saint Thomas, Houston - Department of Economics and Finance

H Gin Chong

Prairie View A&M University - College of Business

Sidika Bayram

Independent

Date Written: April 1, 2014

Abstract

In this paper, we employ econometric techniques to examine the impact of political variables on investor sentiment, stock market returns, and the covariance between investor sentiment and equity returns. Similar to prior studies our results indicate that stock market returns are higher during Democratic presidencies. Contrast we also find that both investor sentiment and the covariance between investor sentiment and stock returns are both higher when Democrats control the White House. Our results seem to suggest that political variables not only influence stock returns, but they also influence the way investors feel about the market.

Keywords: investor sentiment, stock market returns, equity return, political variables

JEL Classification: M1,G02

Suggested Citation

Perez-Liston, Daniel and Chong, H Gin and Bayram, Sidika, The Impact of Political Variables on Stock Returns and Investor Sentiment (April 1, 2014). Journal of Business and Behavioural Sciences, 2014, Available at SSRN: https://ssrn.com/abstract=3645867

Daniel Perez-Liston (Contact Author)

University of Saint Thomas, Houston - Department of Economics and Finance ( email )

United States

H Gin Chong

Prairie View A&M University - College of Business ( email )

Prairie View, TX
United States

Sidika Bayram

Independent

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