Political Cycles and Stock Returns

• 成果类型: Article; Early Access
• 署名作者: Pastor, Lubos; Veronesi, Pietro
• 署名单位: Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; University of Chicago; National Bank of Slovakia; University of Chicago; National Bureau of Economic Research; University of Chicago; Center for Economic & Policy Research (CEPR)
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/710532
• 发表日期: 2020
• 关键词: Macroeconomic policy; business-cycle; UNITED-STATES; uncertainty; PARTIES; ECONOMY; consumption; republicans; INVESTMENT; prices

摘要

We develop a model of political cycles driven by time-varying risk aversion. Agents choose to work in the public or private sector and to vote Democratic or Republican. In equilibrium, when risk aversion is high, agents elect Democrats-the party promising more redistribution. The model predicts higher average stock market returns under Democratic presidencies, explaining the well-known presidential puzzle. The model can also explain why economic growth has been faster under Democratic presidencies. In the data, Democratic voters are more risk averse, and risk aversion declines during Democratic presidencies. Public workers vote Democratic, while entrepreneurs vote Republican, as the model predicts.