Journal of Economic Literature (JEL) Code(s)
Recent literature suggests that both stock returns and economic growth are signiﬁcantly higher under Democratic presidential administrations. This is a puzzle in that persistent diﬀerences in stock returns seem unlikely in eﬀicient markets, and it is not obvious why Democrats should do better. Often these kinds of results go away upon further analysis or more data, and this appears to be true in the present case. In this paper the sample is extended to 27 administrations, from Wilson-1 through Trump. While the mean stock return under the Democrats is generally higher, none of the diﬀerences in means are signiﬁcant at conventional signiﬁcance levels. There is considerable variation in the mean return across administrations, which results in lack of signiﬁcance. Similarly, while the mean output growth rate under the Democrats is larger, the diﬀerence is not signiﬁcant. Again, there is considerable variation in output growth across administrations. Results are also presented with the ten administrations between Grant-2 and Taft added, a total of 37 administrations. While the added data are likely not as good, the conclusion is the same—no signiﬁcant diﬀerences.
Fair, Ray C., "Are Stock Returns and Output Growth Higher Under Democrats?" (2021). Cowles Foundation Discussion Papers. 2602.