Political Announcement Return

50 Pages Posted: 28 Jan 2022 Last revised: 28 Aug 2023

See all articles by Yang Liu

Yang Liu

The University of Hong Kong - Faculty of Business and Economics

Ivan Shaliastovich

University of Wisconsin - Madison

Date Written: December 1, 2021

Abstract

Major political events, such as Elections and the delivery of the State of the Union (SOTU) address, reveal subsequent course of government policy and set future political agenda in the U.S. Similar to traditional macroeconomic and monetary policy announcements, political announcements are associated with abnormal stock market returns of 50 bp on Election and 30 bp on SOTU days, relative to 3 bp daily average. Political announcement returns increase in adverse times of low economic growth and high aggregate volatility, and exhibit pre-announcement drift. We develop an illustrative model for political announcements and show that channels of risk premium/early resolution of uncertainty and optimal choice of government policy can account for the evidence in the data.

JEL Classification: E60, G12, G18

Suggested Citation

Liu, Yang and Shaliastovich, Ivan, Political Announcement Return (December 1, 2021). Available at SSRN: https://ssrn.com/abstract=4016112 or http://dx.doi.org/10.2139/ssrn.4016112

Yang Liu (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Ivan Shaliastovich

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

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