Document Type

Journal Article

Department/Unit

Department of Economics

Language

English

Abstract

This paper shows that in the almost four decades from January 1965 through to December 2003, US stock prices closely followed the 4-year Presidential Election Cycle. In general, stock prices fell during the first half of a Presidency, reached a trough in the second year, rose during the second half of a Presidency, and reached a peak in the third or fourth year. This cyclical trend is found to hold for the greater part of the last ten administrations, starting from President Lyndon Johnson to the administration of President George W. Bush, particularly when the incumbent is a Republican. The empirical results suggest that the Republican Party may have greater cause to engage in active policy manipulation to win re-election than their Democratic counterparts. There is irony in that bullish runs in the stock market have tended to coincide with sub-periods under Democratic administrations. The existence of the Presidential Election Cycle shown in the paper may constitute an anomaly in the US stock market, which could be useful for investors.

Keywords

Presidential Election Cycle, Spectral analysis, EGARCH Intervention model, Stock prices, Returns

Publication Date

2009

Source Publication Title

Mathematics and Computers in Simulation

Volume

79

Issue

11

Start Page

3267

End Page

3277

Publisher

Elsevier

Peer Reviewed

1

DOI

10.1016/j.matcom.2009.05.007

Link to Publisher's Edition

http://dx.doi.org/10.1016/j.matcom.2009.05.007

ISSN (print)

03784754

Included in

Economics Commons

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