Political platforms and stock prices

Political platforms and stock prices

Brian Knight asks, "Are Policy Platforms Capitalized into Equity Prices?..." in a National Bureau of Economic Analysis (NBER) working paper summarized here: "Are Political Platforms Capitalized into Equity Prices?". From the summary (written by Les Picker):

"...Brian Knight systematically measures these ties between political parties and industries using evidence on equity returns during the six-month period before the 2000 U.S. Presidential election. He studies a sample of 70 firms favored under the policy platforms of either Bush (41 firms) or Gore (29 firms), as identified by financial analyst reports.

For this sample of 70 politically sensitive firms in the United States, Knight confirms that favorable policies play a key role in determining a firm's total value. During periods in 2000 when the prospects of a Bush victory were increasing, Bush-favored firms outperformed Gore-favored firms. Likewise, during periods in which prospects of a Gore victory were increasing, Gore-favored firms outperformed Bush-favored firms..."