Abstract
Using monthly market returns over a period of 104 years, we investigate possible relationships between stock market performance and various occurrences in American elections. Unlike most prior studies, we find little relationship between the two. In the relatively few cases where we do find statistically significant relationships, the degree of explanatory power is quite small. Specifically, market returns do not appear to vary based on partisan control of the government, a result that is robust to the inclusion or exclusion of macroeconomic control variables. Further, the often-discussed “second-half” effect, which predicts higher returns during the second half of a given presidential term, turns out to be both weaker and less straightforward than is commonly believed. Overall, neither election results nor the election cycle appears to offer much help in predicting stock market returns.
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Jones, S.T., Banning, K. US elections and monthly stock market returns. J Econ Finance 33, 273–287 (2009). https://doi.org/10.1007/s12197-008-9059-x
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DOI: https://doi.org/10.1007/s12197-008-9059-x