Stock market political cycles in a small, two-party democracy

Jared M. Cahan · Christopher B. Malone · Udomsak Wong Choti

39 citations0/0 files storedApplied Economics Letters

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Financial Markets and Investment Strategies Monetary Policy and Economic Impact Market Dynamics and Volatility

Abstract

Real stock market returns in New Zealand are lower when the left-leaning Labour party is in power than under National party governments, in contrast to the USA where returns are higher under Democratic presidents than under right-leaning Republicans. The difference in real stock market returns between National and Labour is not reversed even when account is taken of the effect of the US political cycle and returns on New Zealand. The results of the study therefore suggest that the presidential puzzle does not transfer directly to other countries with two similar party democracies.

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References

2003The Presidential Puzzle: Political Cycles and the Stock Market 1985Common Stock Returns and Presidential Elections 1995United States Investment Returns during Democratic and Republican Administrations, 1928–1993 1997The Transmission of U.S. Election Cycles to International Stock Returns 1999Presidential Politics, Stocks, Bonds, Bills, and Inflation 1984Political-Economic Cycles in the U.S. Stock Market 1998International correlation structure of financial market movements - the evidence from the UK and the US 1998Share prices under Tory and Labour governments in the UK since 1945

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