Does the U.S. President Affect the Stock Market?
Speaker
Abstract
I find that in a world with asymmetric information and short-sale constraints, sentiment and disagreement over political outcomes should play a key role in determining asset prices. Consistent with the model’s predictions, I show that in the U.S. (1) higher sentiment and disagreement are both followed by lower stock returns; (2) the two effects interact with each other, as positive (negative) sentiment offsets (reinforces) the impact of disagreement; and (3) disagreement is increasing in the President’s incentive to engage in opportunistic behavior. Overall, the paper provides a unified framework to think of how politics affects investment choices.
The Brown Bag Seminars are sponsored by ERIM.
www.eur.nl/financegroup
Information
- Type
- Research Seminar
- Programme
- Finance & Accounting
- Date
- Wed. 18 Sep. 2013
- Time
- 12:00 - 13:15
- Location
- G3-29
