Presidential cycles in international equity flows and returns

Stéphane Chrétien and Hsuan Fu

Finance Research Letters, 2023, vol. 53, issue C

Abstract: This paper investigates to what extent the U.S. presidential cycle can spillover across borders and affect the actions of global investors. Using data from 2000 to 2022 on G10 countries, we show that, on average, the annualized equity premium is 6.1% higher and the net monthly percentage equity fund flows are 0.3% higher in Democratic versus Republican presidencies. These findings reinforce the hypothesis that global investors tend to be more optimistic, instead of more risk averse, in Democratic presidencies. However, we find no significant presidential cycle effect in equity flows from U.S. funds.

Keywords: Political cycles; International stock markets; Equity risk premium; Investment fund flows; Cross-border flows; Presidential party affiliation (search for similar items in EconPapers)
JEL-codes: D72 F21 F32 G12 G15 G23 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007929

DOI: 10.1016/j.frl.2022.103616

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