The Impact of Political Variables on Stock Returns and Investor Sentiment
Journal of Business and Behavioural Sciences, 2014
18 Pages Posted: 17 Jul 2020
Date Written: April 1, 2014
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: Suggested Citation