Politics and liquidity

Ben Marshall, Hung T. Nguyen, Nhut H. Nguyen and Nuttawat Visaltanachoti ()
Authors registered in the RePEc Author Service: Harvey Nguyen ()

Journal of Financial Markets, 2018, vol. 38, issue C, 1-13

Abstract: The equity market is more liquid under Democratic than Republican presidencies. This is apparent at the market level but is stronger in small, value stocks and in industries that are more sensitive to Democratic presidents. The effect is robust to different liquidity measures and time periods and is not solely driven by variation in the business cycle or macroeconomic variables. A number of factors that influence liquidity, including information asymmetry, volatility, and economic policy uncertainty, are all lower during Democratic presidencies. We also show that liquidity increases in the months following a Democratic president replacing a Republican president.

Keywords: Liquidity; Politics; Information asymmetry; Economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:38:y:2018:i:c:p:1-13

DOI: 10.1016/j.finmar.2017.07.004

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