Political Cycles in the Australian Stock Market since Federation

This article examines the political cycles in Australian stock returns from 1901–2005. The article defines the political cycle in terms of the party in power, ministerial tenure and election information effects. The market variables are returns, excess returns over inflation and excess returns over interest rates. Descriptive analysis suggests differences in the variance of returns under Labor and non‐Labor ministries, but no significant differences in mean returns. Using a generalised autoregressive conditional heteroskedastistic‐M model, returns are found to be higher only for non‐Labor ministries before 1949 and there is no difference in excess returns over inflation or interest throughout the full sample.