Journal of Financial Markets Vol. 61 2022
Does the U.S. president affect the stock market?
Abstract
Previous research shows that Democrat- and Republican-leaning investors hold different stock market expectations. In this paper, I identify a novel channel through which political opinions affect investor behavior. Instead of political affiliation, I consider nonpartisan evaluations of the executive from presidential approval rating polls. I find that large net disapproval over the U.S. president’s job is followed by low stock returns, especially in times of high political uncertainty and low market-wide sentiment. Notably, this mechanism explains away Santa-Clara and Valkanov’s (2003) “presidential puzzle.” Overall, the findings suggest that nonpartisan political views have a substantial impact on stock prices.
- DOI
- 10.1016/j.finmar.2021.100704
- Volume
- 61
- Pages
- 100704
- Language
- en
- Sources
- crossref openalex