Abstract
Using data on political speeches, I demonstrate that U.S. presidential candidates influence stock market outcomes. Political speeches that contain economic information increase aggregate market returns and trading volume but decrease market volatility. Speeches with a net negative linguistic tone have the opposite effect. The magnitude of the effect becomes stronger during the first months of campaigns and varies based on the prevailing market conditions. In the cross-section of stock returns, I show that industries with high government exposure are more sensitive to government-spending information and that politically sensitive industries do not react more strongly to candidate speeches. Overall, my findings suggest that political speeches affect investor expectations and, in turn, stock market outcomes.
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