Political Orientation of Government and Stock Market Returns
12 Pages Posted: 31 Jul 2006
Date Written: July 30, 2006
Prior research documented that U.S. stock prices tend to grow faster during Democratic administrations than during Republican administrations. This letter examines whether stock returns in other countries also depend on the political orientation of the incumbents. An analysis of 24 stock markets and 173 different governments reveals that there are no statistically significant differences in returns between left-wing and right-wing executives. Consequently, international investment strategies based on the political orientation of countries' leadership are likely to be futile.
Keywords: Stock Market Returns, Politics, Presidential Puzzle
JEL Classification: G11, G14, G15
Suggested Citation: Suggested Citation