Government spending, political cycles, and the cross section of stock returns

• 成果类型: Article
• 署名作者: Belo, Frederico; Gala, Vito D.; Li, Jun
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; University of London; London Business School; University of Texas System; University of Texas Dallas
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.08.016
• 发表日期: 2013
• 页码: 305-324
• 关键词: Asset pricing; Government spending; POLITICAL CYCLES; Input-output analysis

摘要

Using a novel measure of industry exposure to government spending, we show predictable variation in cash flows and stock returns over political cycles. During Democratic presidencies, firms with high government exposure experience higher cash flows and stock returns, while the opposite pattern holds true during Republican presidencies. Business cycles, firm characteristics, and standard risk factors do not account for the pattern in returns across presidencies. An investment strategy that exploits the presidential cycle predictability generates abnormal returns as large as 6.9% per annum. Our results suggest market underreaction to predictable variation in the effect of government spending policies. (c) 2012 Elsevier B.V. All rights reserved.