“Previous studies find evidence of an electoral cycle in equity market returns. During four-year presidential terms, returns tend to be higher in the third and fourth years in comparison to the first and second years. Furthermore, some studies report higher annual stock market returns during Democratic administrations. Although many studies have focused on the White House, there has been much less research conducted on the effect of Congress on future equity market returns. In this study, the relationship between Congress and future market returns is explored in two distinct approaches. First, the percentage of the House of Representatives and Senate controlled by a political party is examined. Logically, the amount of policies a political party can pass into laws is based on the amount of seats it controls. Second, the change in the percentage of seats gained or lost in Congressional elections is observed. By gaining a large amount of seats, a political party can claim its policies as the “will of the people.” As a result, this party could exert more control in these situations. To test these two theories, a modified “partisan view” model is adopted. In this study, it is found there is a negative correlation between the percentage of the House of Representatives controlled by the Democratic Party and future equity market returns. In terms of the Senate, there is a positive correlation. However, these results are not statistically significant at the 10% level. Furthermore, the relationship between the percentage of seats gained or lost by a political party in a Congressional election and future market returns is not significantly significant. Also, the margin of victory, both in terms of the Electoral College and the popular vote, is negatively correlated to future market returns. These results are also statistically insignificant at the 10% level."--Abstract, page iii.
Enke, David Lee, 1965-
Davis, Michael C.
Engineering Management and Systems Engineering
M.S. in Engineering Management
University of Missouri--Rolla
vi, 36 pages
© 2005 Vincent Louis Ovlia, All rights reserved.
Thesis - Restricted Access
Stock exchanges -- United States
Stock price forecasting -- United States
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Electronic access to the full-text of this document is restricted to Missouri S&T users. Otherwise, request this publication directly from Missouri S&T Library or contact your local library.http://merlin.lib.umsystem.edu/record=b5428333~S5
Ovlia, Vincent Louis, "The effects of Congress on presidential elections on future equity market returns" (2005). Masters Theses. 3710.
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