Realized Stock-Market Volatility of the United States and the Presidential Approval Rating

Rangan Gupta, Yuvana Jaichand, Christian Pierdzioch and Renee van Eyden ()
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Yuvana Jaichand: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

Mathematics, 2023, vol. 11, issue 13, 1-27

Abstract: Studying the question of whether macroeconomic predictors play a role in forecasting stock-market volatility has a long and significant tradition in the empirical finance literature. We went beyond the earlier literature in that we studied whether the presidential approval rating can be used as a single-variable substitute in place of standard macroeconomic predictors when forecasting stock-market volatility in the United States (US). Political-economy considerations imply that the presidential approval rating should reflect fluctuations in macroeconomic predictors and, hence, may absorb or even improve on the predictive value for stock-market volatility of the latter. We studied whether the presidential approval rating has predictive value out-of-sample for realized stock-market volatility and, if so, which types of investors benefit from using it.

Keywords: stock-market volatility; macroeconomic predictors; presidential approval rating; forecasting (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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