Presidential economic approval rating and the cross-section of stock returns

Zilin Chen, Zhi Da, Dashan Huang*, Liyao Wang

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

7 Citations (Scopus)


We construct a monthly presidential economic approval rating (PEAR) index from 1981 to 2019, by averaging ratings on the 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 1.00% 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 and even in other G7 countries. PEAR beta dynamically reveals a firm’s perceived alignment to the incumbent president’s economic policies and investors seem to misprice such an alignment.
Original languageEnglish
Pages (from-to)106-131
Number of pages26
JournalJournal of Financial Economics
Issue number1
Early online date7 Nov 2022
Publication statusPublished - Jan 2023

Scopus Subject Areas

  • Economics and Econometrics
  • Accounting
  • Finance
  • Strategy and Management

User-Defined Keywords

  • Political cycle
  • Presidential economic approval rating
  • Presidential job approval rating
  • Presidential puzzle
  • Sentiment


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