TY - JOUR
T1 - Mapping the Presidential Election Cycle in US stock markets
AU - Wong, Wing-Keung
AU - McAleer, Michael
N1 - Funding Information:
The authors are grateful to the Managing Editor, Robert Beauwens, Associate Editor Les Oxley, and two anonymous reviewers for substantive comments and suggestions that have significantly improved the manuscript. We also appreciate the helpful assistance of Dujuan Chen. The first author would like to thank Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. The research has been partially supported by Hong Kong Baptist University and the Australian Research Council, for which the authors are most grateful.
PY - 2009/7
Y1 - 2009/7
N2 - 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.
AB - 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.
KW - EGARCH Intervention model
KW - Presidential Election Cycle
KW - Returns
KW - Spectral analysis
KW - Stock prices
UR - http://www.scopus.com/inward/record.url?scp=67649425745&partnerID=8YFLogxK
U2 - 10.1016/j.matcom.2009.05.007
DO - 10.1016/j.matcom.2009.05.007
M3 - Journal article
AN - SCOPUS:67649425745
SN - 0378-4754
VL - 79
SP - 3267
EP - 3277
JO - Mathematics and Computers in Simulation
JF - Mathematics and Computers in Simulation
IS - 11
ER -