Information, Policy, and Market Disorder Under Democracy: Evidences from the United States

Financial markets are perplexed by economic functioning, policies undertaken by the then government which is determined by elections wherein civilians interact and create noise that adds predictable bias while evaluating portfolios. This chapter takes the stand against the possibility of efficient market system while the system interacts socially. Information for the market is in three dimensions—phase (path dependency), economy, and globalization, but underneath all these, there runs an undercurrent of election cycle. Though Republicans are friendly to investor-based ethos, it is the Democratic government that appears to be favoring portfolio at least statistically. But the selfish investor defies ethos of development. The chapter finds that the failure of Republicans is partially related to their taxation anomaly. The convolution of politics, economics, and financial markets is illustrated through a bipolar lens of system with political exogeneity and endogeneity. We found that irrational exuberance among rational but myopic investor’s provisions for growth friendly behavior which is often non-friendly towards the concept of development but without development the endeavors of his feed from the by-product of globalization is incomplete. What solves this conflict? Our answer is Politics. Further, our analysis suggests that financial market is in disorder following their denial towards development. In order to reach a favorable state, one needs to first identify broader aspects of developmental processes.