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Predicting the Election Cycle in US Stock Prices : Guinea Pigs versus the Pros

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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
[This is a shortened version of my 2008 discussion paper with the same title]
   
type journal paper
   
keywords Livingston survey, experiment, expectations, forecast, presidential election cycle, stock prices
   
language English
kind of paper journal article
date of appearance 8-1-2010
journal Applied Economics Letters
publisher Routledge (Oxfordshire)
ISSN 1350-4851
ISSN (online) 1466-4291
DOI 10.1080/13504850903299602
volume of journal 17
number of issue 18
page(s) 1759-1765
review double-blind review
   
citation Gärtner, M. (2010). Predicting the Election Cycle in US Stock Prices: Guinea Pigs versus the Pros. Applied Economics Letters, 17(18), 1759-1765, DOI:10.1080/13504850903299602.