Speculating on presidential success: exploring the link between price-earnings ratio and approval ratings

Wisniewski, Tomasz Piotr; Lightfoot, Geoffrey and Lilley, Simon (2012). Speculating on presidential success: exploring the link between price-earnings ratio and approval ratings. Journal of Economics and Finance, 36(1) pp. 106–122.

DOI: https://doi.org/10.1007/s12197-009-9116-0

Abstract

Stock markets and politics are enduring staples of dinner party conversations but surprisingly little is known about the interaction between the two. Here we present evidence for a robust relationship between a key financial measure—the aggregate Price–Earnings ratio—and surveyed approval of the incumbent president. We argue, following the finance literature, that the price–earnings ratio is a composite measure of investors’ hopes and fears. The partially prospective nature of this ratio enables us to shed new light upon the controversy surrounding how the electorate attends to economic circumstances in judging its presidents.

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About

• Item ORO ID
• 55389
• Item Type
• Journal Item
• ISSN
• 1938-9744
• Keywords
• Political Economy; Price–Earnings Ratio; Presidential Approval
• Academic Unit or School
• Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
  Faculty of Business and Law (FBL) > Business
  Faculty of Business and Law (FBL)
• Copyright Holders
• © 2009 Springer Science+Business Media, LLC
• Depositing User
• Tomasz Wisniewski