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Propagation of Political Information

Author

Listed:
  • Daniel Bradley

    (University of South Florida)

  • Sinan Gokkaya

    (Department of Finance, Ohio University)

  • Xi Liu

    (Miami University of Ohio - Richard T. Farmer School of Business Administration)

  • Roni Michaely

    (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute)

Abstract

We identify an important channel through which political information propagates into capital markets—Washington policy analysts (WAs). WAs monitor political developments and produce research to interpret the impact of these events. Institutional clients generate superior returns on their trades and channel more commissions to brokerages providing policy research. WA policy research reports evoke significant market reactions, and sell-side analysts with access to WA research issue superior stock recommendations. These effects are particularly acute in politically sensitive industries, in periods of high political uncertainty, and when the quality of WA is higher. Overall, we uncover a new conduit through which political information filters into asset prices.

Suggested Citation

  • Daniel Bradley & Sinan Gokkaya & Xi Liu & Roni Michaely, 2020. "Propagation of Political Information," Swiss Finance Institute Research Paper Series 20-26, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2026
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    More about this item

    Keywords

    Policy analysts; policy research; political uncertainty; trading commissions; institutional trading; sell-side analysts;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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