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

No 202311, Working Papers from University of Pretoria, Department of Economics

Abstract: Studying the question whether macroeconomic predictors play a role for forecasting stock market volatility has a long and significant tradition in the empirical finance literature. We go beyond earlier literature in that we study whether the presidential approval rating can be used as a single-variable substitute in place of standard macroeconomic predictors when forecasting stock-market volatility of 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 study 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: C32 C53 G10 G17 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-05
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Citations: View citations in EconPapers (3)

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