Chris Rasch wrote: >Found this at http://www.anderson.ucla.edu/alumni/assets/news.html. > Under Democratic presidents, the average excess > return of investments in the stock market over > the three-month Treasury bill is about 11 > percent. Under Republicans, it is less than two > percent; a nine percent difference. Examination > of the risk-free interest rate produces another > noteworthy result: under Republicans, the real > T-bill rate is, on average, higher than the > rate under Democrats by more than three > percent. ..., the two > researchers control for a vast number of > macroeconomic variables, such as an indicator > of recessions, the slope of the yield curve and > credit spreads of bonds, that help remove the > effect of business cycle fluctuations. Their > surprising results hold: returns under > Democrats are still, on average, higher. ... > market volatility, a measure of risk, is > actually higher under Republican presidents. A straightforward way to find out if speculators think this a real relation or a coincidence is to get market estimates of stock and bond prices *conditional* on the party of the next president. (The mechanics of doing this are described at http://hanson.gmu.edu/decisionmarkets.pdf) I predict that speculators would estimate a *much* smaller than 9pt difference, if any, between Republican vs. Democrat stock returns. Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030-4444 703-993-2326 FAX: 703-993-2323
