Is There a Presidential Election Cycle in Firm Financials?

Ray R. Sturm ()
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Ray R. Sturm: Department of Finance, College of Business Administration, University of Central Florida, P. O. Box 161400, Orlando, FL 32816, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2016, vol. 19, issue 02, 1-18

Abstract: A presidential election cycle (PEC) in stock returns has been well-documented in the academic literature. Prior studies have pointed to economic policy as a cause of the phenomenon apparently overlooking the role of firm value. This study examines changes in firm valuation as the cause. Using firm-level data, this study finds a convincing cycle in firms’ book-to-market (BE/ME) ratios, earnings yield and most notable, in log-changes in annual revenue. In particular, log-changes in revenue during the election year appear to be instrumental in the previously document PEC in stock returns.

Keywords: Presidential election cycle; financial statements (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S0219091516500107

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