Political uncertainty, market anomalies and Presidential honeymoons
| Autor: | Stephen Gray, Kam Fong Chan, Philip Gray, Angel Zhong |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
040101 forestry
Economics and Econometrics 050208 finance Presidential system Political risk 05 social sciences Theoretical models Equity (finance) 04 agricultural and veterinary sciences Monetary economics Politics Market anomalies 0502 economics and business Economics Value premium 0401 agriculture forestry and fisheries Profitability index Finance |
| Zdroj: | Journal of Banking & Finance. 113:105749 |
| ISSN: | 0378-4266 |
| DOI: | 10.1016/j.jbankfin.2020.105749 |
| Popis: | The first 100 days of a newly-elected President's administration are often a period of substantial and concentrated policy change. This paper shows that measures of uncertainty and risk aversion rise sharply during Presidential honeymoons. Consistent with theoretical models that suggest that investors demand compensation for bearing heightened political risk, we document striking spread returns to value, investment and profitability anomalies during honeymoons. For example, the book-to-market value premium averages 3.51% per month during Presidential honeymoons, yet only 0.27% per month at other times. These findings survive numerous robustness checks. Nonetheless, establishing a direct link between escalating political risk and equity returns proves challenging. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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