Are Stock Returns and Output Growth Higher Under Democrats?

Ray C. Fair ()
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Ray C. Fair: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/ray-fair

No 2277, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Recent literature suggests that both stock returns and economic growth are significantly higher under Democratic presidential administrations. This is a puzzle in that persistent differences in stock returns seem unlikely in efficient markets, and it is not obvious why Democrats should do better. Often these kinds of results go away upon further analysis or more data, and this appears to be true in the present case. In this paper the sample is extended to 27 administrations, from Wilson-1 through Trump. While the mean stock return under the Democrats is generally higher, none of the differences in means are significant at conventional significance levels. There is considerable variation in the mean return across administrations, which results in lack of significance. Similarly, while the mean output growth rate under the Democrats is larger, the difference is not significant. Again, there is considerable variation in output growth across administrations. Results are also presented with the ten administrations between Grant-2 and Taft added, a total of 37 administrations. While the added data are likely not as good, the conclusion is the same-no significant differences.

Keywords: Stock returns; Output growth; Political parties (search for similar items in EconPapers)
JEL-codes: G01 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021-02
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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