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Political puzzle: Political cycles and the stock market in Sweden
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School of Business |
Bachelor's thesis
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en
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30
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I use monthly data from 1911 to 2014 to examine the relationship between the cabinet partisanship (position on the political left-to-right axis) and stock market reactions in Sweden. I use manifesto analysis as a measure of party partisanship. I find that the volatility is lower (higher) when a left-leaning (right-leaning) cabinet gets the mandate after a right-leaning (left-leaning) cabinet. The result is economically and statistically significant. Second, I find that the same pattern persists throughout the cabinets’ mandates. In addition, I find that there is no clear relationship between cabinet partisanship and excess returns. Since excess returns cannot explain the high volatility, the relationship between cabinet partisanship and stock market is puzzling.