Propagation of Political Information

Daniel Bradley, Sinan Gokkaya, Xi Liu and Roni Michaely
Additional contact information
Daniel Bradley: University of South Florida
Sinan Gokkaya: Department of Finance, Ohio University
Xi Liu: Miami University of Ohio - Richard T. Farmer School of Business Administration

No 20-26, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We identify an important channel through which political information propagates into capital markets—Washington policy analysts (WAs). WAs monitor political developments and produce research to interpret the impact of these events. Institutional clients generate superior returns on their trades and channel more commissions to brokerages providing policy research. WA policy research reports evoke significant market reactions, and sell-side analysts with access to WA research issue superior stock recommendations. These effects are particularly acute in politically sensitive industries, in periods of high political uncertainty, and when the quality of WA is higher. Overall, we uncover a new conduit through which political information filters into asset prices.

Keywords: Policy analysts; policy research; political uncertainty; trading commissions; institutional trading; sell-side analysts (search for similar items in EconPapers)
JEL-codes: G10 G18 G20 G23 L50 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2020-04
New Economics Papers: this item is included in nep-mst and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2026

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