[Infowarrior] - Congress and the Stock Market

[Richard Forno]

Academic research proves it -- when Congress is not in session, the  
stock market does well.  -rick



http://papers.ssrn.com/sol3/papers.cfm?abstract_id=687211

Congress and the Stock Market

Michael F. Ferguson
University of Cincinnati - Department of Finance - Real Estate

Hugh Douglas Witte
University of Missouri at Columbia - Department of Finance


March 13, 2006


Abstract:

We find a strong link between Congressional activity and stock market  
returns that persists even after controlling for known daily return  
anomalies. Stock returns are lower and volatility is higher when  
Congress is in session. This "Congressional Effect" can be quite large  
- more than 90% of the capital gains over the life of the DJIA have  
come on days when Congress is out of session. The Effect varies  
systematically with the public's opinion of Congress: returns are  
lower and volatility higher when a relatively unpopular Congress is  
active. Public opinion appears to play a fundamental role in market  
prices. This is consistent with a mood-based explanation that sees  
Congress as 'depressing' the average investor. Alternatively, our  
results can also be reconciled with rational explanations that view  
Congressional activity as a proxy for regulatory uncertainty or rent- 
seeking behavior.

Keywords: stock market, Congress, anomalies, behavioral finance

JEL Classifications: G1, G10, G14, G18

Working Paper Series

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=687211