Predicting the Presidential Election Cycle in US Stock Prices: Guinea Pigs versus the Pros
Series
6
Type
discussion paper
Date Issued
2008-04-08
Author(s)
Abstract
The notion that US stock prices follow a pattern that is synchronized with the rhythm of presidential elections has been a topic among financial investors for a long time. Academic work exists that supports this idea, quantifies the pattern, and has demonstrated its robustness over several decades and across parties in power. This paper takes the existence and robustness of this presidential election cycle for granted and asks whether individuals exploit it when asked to predict stock prices. It considers and contrasts two types of such forecasts: Those made by professionals included in the Livingston survey; and those made by students in a laboratory experiment. One key result is that neither group fares particularly well, though participants in the lab experiment clearly outperformed the professionals.
[http://ideas.repec.org/p/usg/dp2008/2008-06.html Volltext herunterladen]
[http://ideas.repec.org/p/usg/dp2008/2008-06.html Volltext herunterladen]
Language
English
Keywords
Livingston survey
experiment
expectations
forecast
presidential election cycle
stock prices
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Department of Economics, University of St. Gallen
Publisher place
St. Gallen
Number
2008
Start page
19
Subject(s)
Division(s)
Eprints ID
44450