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US partisan conflict shocks and international stock market returns

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Abstract

This paper investigates the impact of US partisan conflict index (PCI) on international stock markets. It extracts innovations from a VAR model and estimates regression specifications. The results document that PCI has a substantial explanatory power. This effect is unique given that (i) traditional disagreement measures per se have no explanatory power, and (ii) neither macroeconomic, nor financial uncertainty measures can undermine the power of PCI. The effect appears to be stronger during periods when the Republican Party is in power. Findings further suggest that this linkage could be seen through the prism of both macroeconomic activity and discount rates.

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The authors did not receive support from any organization for the submitted work.

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Authors and Affiliations

  1. University of Piraeus, Piraeus, Greece

    Nicholas Apergis

  2. Hellenic Mediterranean University, Iraklio, Greece

    Ioannis Chatziantoniou

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  1. Nicholas Apergis
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  2. Ioannis Chatziantoniou
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Correspondence to Nicholas Apergis.

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Apergis, N., Chatziantoniou, I. US partisan conflict shocks and international stock market returns. Empir Econ 63, 2817–2854 (2022). https://doi.org/10.1007/s00181-022-02237-1

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