Market Returns: Dems vs Repubs

W

waggie945

Associate Professor of Finance, Pedro Santa-Clara at UCLA has written a very interesting paper on the popular "myth" that the stockmarket does better under Republicans than Democrats.

"Using data since 1927, we find that the average excess return of the value-weighted CRSP index over the 3-month Treasury bill rate has been about 2% under Republican and 11% under Democratic presidents - - - a striking difference of 9% per year! This difference is economically and statistically significant. A decomposition of excess returns reveals that the difference is due to real market returns being higher under Democrats by more than 5%, as well as to real interest rates being almost 4% lower under Democrats. The results are even more impressive for the equal-weighted portfolio, where the difference in excess returns between Republicans and Democrats reaches 16%."

From The Journal of Finance, Volume LVIII, No. 5; October 2003
 
Quote from waggie945:

Associate Professor of Finance, Pedro Santa-Clara at UCLA has written a very interesting paper on the popular "myth" that the stockmarket does better under Republicans than Democrats.

"Using data since 1927, we find that the average excess return of the value-weighted CRSP index over the 3-month Treasury bill rate has been about 2% under Republican and 11% under Democratic presidents - - - a striking difference of 9% per year! This difference is economically and statistically significant. A decomposition of excess returns reveals that the difference is due to real market returns being higher under Democrats by more than 5%, as well as to real interest rates being almost 4% lower under Democrats. The results are even more impressive for the equal-weighted portfolio, where the difference in excess returns between Republicans and Democrats reaches 16%."

From The Journal of Finance, Volume LVIII, No. 5; October 2003
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I've always heard the markets do best when there is a split between control of Congress and the White House. Either party with too much power is a bad thing. And this administration is way too radical for the long term good of the US economy. They have 'religious views' about all things, the economy included.

m
 
There has been a TON of research on this matter, most of which supports the findings of this UCLA guy, but for a broader perspective the following website constantly tracks and updates the dem vs. rep stats:

http://www.eriposte.com/economy/other/demovsrep.htm

Now for the really freaky stuff, the next link documents that congress has more of an influence...WHEN THEY ARE IN RECESS!!!... "Dr. Lamb studied stock market fluctuations from 1897 to 1993. During those years the House was in session for a total of 16,387 days. The House was in recess or adjournment for 9,950 days. Dr. Lamb discovered that stock market returns for the days the House was not in session were fully *thirteen times greater* than when Congress was in session.

Dr. Lamb says further that, "Over 95% of the rise in the market between 1988 and 1993 occurred while Congress was in recess." "

Riddle me that one, batman.

That is all.

BigMike
 
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