Does local political support influence financial markets? A study on the impact of job approval ratings of political representatives on local stock returns |
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| Authors: | Sunghoon Joo Dong H Kim Jung Chul Park |
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| Institution: | 1. College of Business Administration and Public Policy, California State University Dominguez Hills, Carson, California;2. Dicke College of Business Administration, Ohio Northern University, Ada, Ohio;3. Muma College of Business, University of South Florida, Tampa, Florida |
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| Abstract: | Using data on job approval ratings of governors, U.S. senators, and the president, we find that firms located in states with high approval ratings outperform firms located in states with low approval ratings by .64% per month. Furthermore, this relationship is stronger when investors are actively involved in politics, when local politicians are closer to the center of political power, for small firms that have a larger proportion of local investors, and for financially strong areas where investors are ready to execute investments in local stocks. Overall, our study shows that investors’ political sentiment is important in determining stock returns. |
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| Keywords: | job approval ratings performance political sentiment returns G11 G14 G18 |
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