Quarterly Journal of Political Science > Vol 8 > Issue 4

Presidential Prospects, Political Support, and Stock Market Performance

Nikhar Gaikwad, Yale University, USA, nikhar.gaikwad@yale.edu
Suggested Citation
Nikhar Gaikwad (2013), "Presidential Prospects, Political Support, and Stock Market Performance", Quarterly Journal of Political Science: Vol. 8: No. 4, pp 451-464. http://dx.doi.org/10.1561/100.00012114

Published: 15 Oct 2013
© 2013 N. Gaikwad
Event studies/market efficiency studies,  Law and Economics,  Campaign finance,  Interest groups,  Political economy,  Presidential politics
Money and politicsevent studiescampaign contributionspresidential elections
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In this article:
1. Measuring Stock Price Responses to Presidential Prospects
2. Empirical Findings
3. Discussion


I exploit the sudden and dramatic jolt that Osama Bin Laden's capture gave to Barack Obama's 2012 re-election prospects to gauge the relationship between presidential prospects and stock market valuation changes. Using campaign contributions as an indicator of political support, I find that following Bin Laden's death, firms that had previously supported Democrats registered significant positive returns, whereas firms that had supported Republicans registered significant negative returns. Across the S$P 500, the president's transformed re-election prospects shifted market capital worth $101 billion over one day and $245 billion over one week. My findings indicate that the relationship between the presidency and firm valuations is associated with patterns of past political support, substantively and significantly important, and more pronounced for the presidency than for Congress.


Replication Data | 100.00012114_supp.zip (ZIP).

This file contains the data that is required to replicate the data on your own system.

DOI: 10.1561/100.00012114_supp

Online Appendix | 100.00012114_app.zip (ZIP).

This is the article's accompanying appendix.

DOI: 10.1561/100.00012114_app