Presidential Cycles Research Articles

Left behind: Partisan identity, stock market participation, and wealth inequality

This paper investigates whether and how opposing partisans differ in their wealth accumulation. Using microdata from a longitudinal U.S. household survey, I document that Democrats are on average 11% less likely than Republicans to participate in the stock market. Moreover, the partisan gap widens sharply, by 13%, under Democratic presidencies, precisely when the stock market returns are substantially higher. This dynamic pattern accounts for more than half of the discrepancy in wealth accumulation between Democrats and Republicans over presidential cycles. A decomposition exercise uncovers two underlying forces in opposite directions: while the partisan gap in stock market participation through directly held investment accounts narrows during Democratic presidencies, the narrowing gap is dominated by the widening partisan gap in stock market participation through retirement accounts during the same periods. I further provide speculative evidence that the widening gap is related to job changes, and in particular, entrepreneurship entry.

Presidential Cycles and Exchange Rates

Presidential Cycles and Exchange Rates

Presidential cycles in international equity flows and returns

This paper investigates to what extent the U.S. presidential cycle can spillover across borders and affect the actions of global investors. Using data from 2000 to 2022 on G10 countries, we show that, on average, the annualized equity premium is 6.1% higher and the net monthly percentage equity fund flows are 0.3% higher in Democratic versus Republican presidencies. These findings reinforce the hypothesis that global investors tend to be more optimistic, instead of more risk averse, in Democratic presidencies. However, we find no significant presidential cycle effect in equity flows from U.S. funds.

Another Presidential Puzzle? Presidential Economic Approval Rating and the Cross-Section of Stock Returns

We construct a monthly Presidential Economic Approval Rating (PEAR) index from 1981 to 2019, by averaging ratings on president’s handling of the economy across various national polls. In the cross-section, stocks with high betas to changes in the PEAR index significantly under-perform those with low betas by 0.96% per month in the future, on a risk adjusted basis. The low-PEAR-beta premium persists up to one year, and is present in various sub-samples (based on industries, presidential cycles, transitions, and tenures) and even in other G7 countries. It is also robust to different risk adjustment models and controls for other related return predictors. PEAR beta dynamically reveals a firm’s perceived alignment to the incumbent president’s economic policies and investors seem to misprice such an alignment.

The Impact of the Obama and Trump Presidential Election Cycles on the S and P500

ABSTRACT. The relationship between the US presidential election cycle and the S&P500 index is examined in this paper. We focus our attention on President Barack Obama and President Donald Trump presidential election cycles, as there is a research gap examining these two presidency periods. A comparative study is limited as Obama served two terms in office while Trump only one. Daily data from January 20, 2009 to November 16, 2020 was analysed. The selected dataset covers Obamas two terms and Trumps single term in office to examine cointegration (long-run relationships) and volatility dynamics exhibited by the S&P500. The study is framed around economic and political uncertainty that was captured by the US Economic Policy Uncertainty index (EPU). The ARDL, the LASSO and the GARCH models were implemented to facilitate the analysis of long-run dynamics, and volatility patterns, and to deal with modelling over parameterisation issues. The results suggest the existence of a long-run relationship for both the Obama and Trump administrations, showing that the EPU index could be connected to the behaviour of the S&P500. The long-term association between political uncertainty and the performance of the S&P500 offers insights into the importance of monitoring market volatility during presidential cycles as investors can generate profit and losses derived of markets reactions to the presidential cycle, suggesting the importance of an active portfolio management strategy during times of election. The research findings indicate low-levels of volatility persistence registered during Obamas second presidential cycle. Higher levels of market uncertainty were identified during the first cycle, results that are not surprising, as the Obamas first term in office was impacted by the global economic and financial crisis. This period was characterised by a delicate economic and financial climate, followed by government active intervention to address the effects of the crisis. In the context of the Trump admin- istration, his single term in office was shaken by the outburst of the global health crisis. Volatility persistence levels exhibited during Obama's first term in office were manifest again towards the end of Trump administration, mirroring the impact of the new health crisis and the administration lack of strategy and incoherent approach to the domestic and international impact of COVID-19.

Money for Nothing? Financing the 2016 and 2020 U.S. Presidential Nomination Campaigns

The aim of the paper is to analyze the relationship between campaign money and winning the 2016 and 2020 presidential nominations in the United States. While in the last two decades of the twentieth century candidates who raised most money almost always became major party nominees, the record is mixed for presidential cycles 2004-2012. By comparing various dimensions of campaign finance, including activities of candidates' campaign committees and outside groups, the Author demonstrates that while successful fundraising, resulting in dozens of millions of dollars at the disposal of candidates, seems necessary to run a competitive campaign, raising the most money is no longer pre-requisite for becoming major party presidential nominee.

THE INDIAN STOCK MARKET AND POLITICAL CYCLES

ABSTRACT We examine the relationship between the Indian stock market and political cycles over the period of October 1999 to April 2019. First, we find Indian stock market returns are not statistically different during periods when the prime minister is from the left-leaning Indian National Congress or from the right-leaning Bharatiya Janata Party. Second, we find Indian stock market returns during any one particular year are not statistically different from other four years of the five-year Indian prime ministerial term. Third, we find Indian stock market generate high positive returns comparable to that of the U.S. stock market irrespective of political affiliation of the prime minister and the ruling party of the Indian government. We conclude Indian stock market generates high positive returns regardless if the control of the government is with the Indian National Congress or the Bharatiya Janata Party. Keywords Indian stock market, political cycles. Prime minister of India, Bharatiya Janata Party, Indian National Congress, Democrat premium, left-wing premium, presidential cycles, election cycles.

Left Behind: Partisan Identity and Wealth Inequality

Using longitudinal U.S. household data, I document that Democrats are less likely than Republicans to participate in the stock market. More importantly, the partisan gap in stock market participation widens sharply under Democratic presidencies, precisely when the stock market returns are substantially higher. This dynamic pattern accounts for more than 40 percent of the discrepancy in wealth accumulation between Democrats and Republicans over presidential cycles. Overall, these findings underscore the interplay between individual ideology, household portfolio choice, and changing economic and political landscape.

U.S. presidential cycles and the foreign exchange market

AbstractWe examine the association between the foreign exchange rate of the US dollar and US presidential cycles. Results show that Republican presidencies tend to start with a strong dollar, which then depreciates over the course of the presidency. In contrast, Democratic presidencies tend to begin with a weak dollar that then appreciates. These patterns result in an apparent presidential effect in US foreign exchange rates, the direction of which depends on whether exchange rates are measured by levels or by returns.

Presidential Cycles in the USA and the Dollar-Pound Exchange Rate: Evidence from Over Two Centuries

In this paper, we analyze the impact of the U.S. presidential cycles on the dollar relative to the British pound over the longest possible monthly period of 1791:01 to 2018:10, based on GJR (or threshold generalized autoregressive conditional heteroscedasticity (GARCH)) model. The usage of over two centuries of data controls for sample selection bias, while a GJR model accommodates for omitted variable bias. We find that over the entire sample period, the Democratic regime has indeed depreciated the dollar relative to the pound. However, during the post Bretton Woods era, the depreciation of the dollar is not statistically significant under the Democratic presidents.

Presidential cycles and time-varying bond–stock market correlations: Evidence from more than two centuries of data

Utilizing a DCC-GARCH model to capture time-varying correlations, we show that Democratic administrations are generally associated with lower degree of co-movement between the stock and government bond returns. The findings are in line with the documented presidential cycle effect on stock market returns and corroborate recent evidence that, when risk aversion is high, agents tend to elect the Democratic Party.

The Consistent Attributes of the Ideal Presidential Candidate in an Increasingly Divided Electorate

Political image is a transactional process between candidates’ actions and how voters assess them with their own individual ideas of the ideal presidential candidate. This 28-year longitudinal study of political communication serves to address the following four research questions. First, what attributes do voters find most important or desirable for a candidate to possess—in other words, what makes him or her an ideal presidential candidate? Second, how do these evaluations of ideal characteristics change across time and a different field of candidates? Third, how important are the candidates’ demographic variables? Fourth, how do the evaluations of ideal characteristics differ across the age, gender, and political party affiliation of the voters? These questions are posed and answered across 1988 to 2016 presidential campaign cycles in one of the longest research studies in the discipline of political communication.

Diversity in 2008, Homogeneity in 2012

Political image is a transactional process between candidates’ actions and speech and how voters assess them with their own individual ideas of the ideal presidential candidate. This 24-year longitudinal study of political communication serves to address the following four research questions. First, what attributes do voters find most important or desirable for a candidate to possess—in other words, what makes him or her an ideal presidential candidate? Second, how do these evaluations of ideal characteristics change across time and a different field of candidates? Third, how important are the candidates’ demographic variables? Fourth, how do the evaluations of ideal characteristics differ across the age, gender, and political party affiliation of the voters? These questions are posed and answered across 1988 to 2012 presidential campaign cycles in one of the longest research studies in the discipline of political communication.

Mobilizing Money

A great deal of research focuses on contributions by political action committees (PACs) to candidates, but PACs are also institutional mechanisms for mobilizing contributions by individuals. Restrictions on the ability of PACs sponsored by businesses, trade associations, and labor unions to solicit contributions and the private benefits of contributing imply that these PACs are likely to mobilize donors who do not otherwise contribute to political campaigns. Analysis of itemized contributions to PACs during the 2004 election cycle confirms this. Moreover, the numbers of donors and dollars contributed to sponsored PACs aggregated by congressional district during 1996-2006 are relatively unaffected by electoral competition, presidential cycles, or changes in campaign finance regulations, and the effects of urbanization are less uniform than for nonconnected PACs. PACs sponsored by economic institutions therefore expand the pool of donors beyond the usual suspects.

Politics and Stock Returns: A Rationalization

In this study, we find some evidence in favor of systematic risk being priced in the cross-section of stock returns when the effects of presidential cycles and political environments are taken into account. During Democratic presidencies or harmonious political environments, beta has a positive relation to stock returns, but is negatively related to returns during Republican presidencies or in gridlock periods. We find that both the presidential puzzle and the harmony premium can be rationalized when the effects of politics on the beta-return relation are taken into account.

Calendar Effects on Stock Returns Across Multiple States

We test calendar effects on stock returns considering business and presidential cycles and volatility regimes and show evidence for eight financial market states. We jointly consider four types of seasonality: the day-of-the-week effect (DWE), the macroeconomic announcement effect (MAE), the January effect (JE) and the macroeconomic announcement-January effect (MAJE). Our approach enables us to determine in which states the efficient-market hypothesis (EMH) does not hold. Most of the evidence found is for the DWE, which arises mainly under low volatility regimes and in contraction periods in both Democratic and Republican administrations.

Polls and Elections: From Hillary to Michelle: Public Opinion and the Spouses of Presidential Candidates

This study analyzes public opinion data on would‐be first ladies during the presidential campaign season from 1992 to 2008. By comparing attitudes toward would‐be first ladies over the last five presidential cycles, we identify key areas of stability and change in Americans' attitudes toward these individuals. Additionally, survey data are used to explore how attitudes about these women differ across key demographics, to identify factors that shape the public's attitudes concerning presidential candidates' wives, and to explore the impact of these women on their husbands' favorability ratings. The results indicate that spouses who embody the traditional role of first lady tend to be more popular, while spouses who assume an active role in advocating policy, such as Hillary Clinton, garner less support. Most candidate spouses generate highly polarized reactions along partisan lines, although more traditional spouses evoke a less divisive response.

Presidential Candidate Age and Schlesinger's Cycles of American History (1789-1992): When Younger Is Better

Based on Simonton's (1994) conclusion that in politics the young are the heralds of change, the old the protectors of stability, two hypotheses were tested : (I) winning presidential candidates are older in Schlesinger's (1986) private interest election years than in his public purpose election years ; (2) winners are relatively older than corresponding second-place finishers in private interest election years than in public purpose election years. Both hypotheses were supported for first-time presidential election victories since 1789 and all elections of the past 100 years. In addition, the first hypothesis was supported for all elections since 1789, with 1812 and 1832 excluded ; the second hypothesis was supported for all elections since 1789, with 1812, 1832, 1844, 1852, and 1864 excluded. In marked contrast, the ages of the second-place finishers did not vary significantly according to Schlesinger's phases for any of the comparison groups of elections.