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Company Stock Reactions to the 2016 Election Shock: Trump, Taxes and Trade

Alexander Wagner, Richard Zeckhauser and Alexandre Ziegler
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Alexandre Ziegler: University of Zurich

No 17-06, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Donald Trump’s election was a significant surprise. The reaction of company stock prices to the election reflects shifts in investor expectations about economic growth, taxes, and trade policy. High-beta stocks outperformed, presumably due to strengthened growth expectations. Expectations of significant corporate tax cuts boosted high-tax firms, but hurt firms with significant net operating loss carryforward balances. Investors currently perceive the climate to be more favorable for domestically-oriented companies than those with substantial foreign involvement. Markets incorporated expectations on growth and tax policy into stock prices relatively quickly; they took more time to digest the consequences of shifts in trade policy.

Keywords: Stock returns; event study; corporate taxes; trade policy; corporate interest payments; post-news drift; election surprise (search for similar items in EconPapers)
JEL-codes: G12 G14 H25 O24 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2017-02
New Economics Papers: this item is included in nep-acc and nep-pbe
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Company Stock Reactions to the 2016 Election Shock: Trump, Taxes and Trade (2017) Downloads
Working Paper: Company Stock Reactions to the 2016 Election Shock: Trump, Taxes and Trade (2017) Downloads
Working Paper: Company Stock Reactions to the 2016 Election Shock: Trump, Taxes and Trade (2017) Downloads
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