Is it 'Kerry Up, Market Down' or 'Market Down, Kerry Up?' Correlation Versus Causation

Posted: 8 Sep 2004

See all articles by Naveen Khanna

Naveen Khanna

Michigan State University

Jennifer Marietta-Westberg

U.S. Securities and Exchange Commission

Date Written: August 18, 2004

Abstract

A negative relationship between contemporaneous stock market movements and Kerry's probability of getting elected has been documented. This raises a critical question. Does this relationship mean stock markets react negatively to Kerry's prospects, or that Kerry's prospects improve whenever the stock market dips? Establishing this causation is probably critical for both campaigns. Using lagged relationships, we show the causation is from the stock market to Kerry's prospects. This supports the popular adage "It's the economy, Stupid".

Keywords: Election, Causation, Kerry, Bush

JEL Classification: C20, C52, D72

Suggested Citation

Khanna, Naveen and Marietta-Westberg, Jennifer, Is it 'Kerry Up, Market Down' or 'Market Down, Kerry Up?' Correlation Versus Causation (August 18, 2004). Available at SSRN: https://ssrn.com/abstract=586703

Naveen Khanna (Contact Author)

Michigan State University ( email )

East Lansing, MI 48824-1121
United States
517-353-1853 (Phone)
517-432-1080 (Fax)

Jennifer Marietta-Westberg

U.S. Securities and Exchange Commission ( email )

100 F St NE
Washington, DC 20549
United States

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