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US partisan conflict shocks and international stock market returns

Author

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  • Nicholas Apergis

    (University of Piraeus)

  • Ioannis Chatziantoniou

    (Hellenic Mediterranean University)

Abstract

This paper investigates the impact of US partisan conflict index (PCI) on international stock markets. It extracts innovations from a VAR model and estimates regression specifications. The results document that PCI has a substantial explanatory power. This effect is unique given that (i) traditional disagreement measures per se have no explanatory power, and (ii) neither macroeconomic, nor financial uncertainty measures can undermine the power of PCI. The effect appears to be stronger during periods when the Republican Party is in power. Findings further suggest that this linkage could be seen through the prism of both macroeconomic activity and discount rates.

Suggested Citation

  • Nicholas Apergis & Ioannis Chatziantoniou, 2022. "US partisan conflict shocks and international stock market returns," Empirical Economics, Springer, vol. 63(6), pages 2817-2854, December.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:6:d:10.1007_s00181-022-02237-1
    DOI: 10.1007/s00181-022-02237-1
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    More about this item

    Keywords

    US political uncertainty; International stock markets; VAR modelling;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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