The impact of presidential economic approval rating on stock volatility: An industrial perspective

Abstract

This paper examines the influence of presidential economic approval rating (PEAR) on stock volatility in different sectors. We find that PEAR significantly explain future stock volatility in Health Care, Consumer Staples, Information Technology and Telecom Services sectors both in- and out-of-sample. Interestingly, we find this explanatory power for all sectors exists only during the economic expansions. Finally, we show that the PEAR has long-term predictability on stock markets.