Presidential economic approval rating and the cross-section of stock returns

• 成果类型: Article
• 署名作者: Chen, Zilin; Da, Zhi; Huang, Dashan; Wang, Liyao
• 署名单位: Southwestern University of Finance & Economics - China; University of Notre Dame; Singapore Management University; Hong Kong Baptist University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.10.004
• 发表日期: 2023
• 页码: 106-131
• 关键词: Presidential puzzle; Political cycle; Presidential economic approval rating; Presidential job approval rating; Sentiment

摘要

We construct a monthly presidential economic approval rating (PEAR) index from 1981 to 2019, by averaging ratings on the president's handling of the economy across various national polls. In the cross-section, stocks with high betas to changes in the PEAR index significantly under-perform those with low betas by 1.00% per month in the future, on a risk-adjusted basis. The low PEAR beta premium persists up to one year, and is present in various sub-samples and even in other G7 countries. PEAR beta dynamically reveals a firm's perceived alignment to the incumbent president's economic policies and investors seem to misprice such an alignment.& COPY; 2022 Elsevier B.V. All rights reserved.