Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-19T12:43:47.316Z Has data issue: false hasContentIssue false
  • English
  • Français

Partisan policy promises and sector-specific stock-market performance: evidence from Mexico's 2006 presidential campaign

Published online by Cambridge University Press:  20 January 2017

Allyson Lucinda Benton
Get access Rights & Permissions [Opens in a new window]

Abstract

Scholars have long held that partisan politics cause aggregate-level fluctuations in markets. However, if investors hold different policy preferences, the effects of election campaigns on their behavior should be more nuanced. In particular, investors in economic sectors benefiting from neo-liberal economic policies might respond favorably to gains in support by right-leaning candidates, whereas those expected to profit from state-led economic development might react favorably to gains by left-leaning contenders. To test these propositions, I examine stock market performance by economic sector during Mexico's 2006 presidential race. Statistical analysis of pre-election polls and stock market returns during the campaign reveals that, although investors did not react to potential partisan policy change in the ways originally expected, they did respond to polling news differently by economic sector. The findings demonstrate the importance of disaggregating stock, bond, and currency markets according to economic criteria, and thus the limitations of aggregate level analysis for research on politics and markets.

Type
Research Article
Information
Business and Politics , Volume 15 , Issue 2 , August 2013 , pp. 187 - 215
Copyright
Copyright © V.K. Aggarwal 2013 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Alesina, Alberto and Rosenthal, Howard. 1995. Partisan Politics, Divided Government, and the Economy. New York: Cambridge University Press.Google Scholar
Alesina, Alberto, Roubini, Nouriel, Cohen, and Gerald D. 1997. Political Cycles and the Macroeconomy. Cambridge: The MIT Press.Google Scholar
Stearns, Bear. 2006. Mexico: Overall Valuations Are High, While Risks Rise: Downgrading to Underweight from Market Weight; Take Profits in Media. Latin America Equity Strategy. New York: Bear Stearns.Google Scholar
Bechtel, Michael M. 2009. “The Political Sources of Systematic Investment Risk: Lessons from a Consensus Democracy.” The Journal of Politics 71 (2): 661–677.Google Scholar
Beltrán, Ulises. 2009a. “Ideología y polarización en la elección de 2006.” Política y Goberno Volumen Temático 2009 (Elecciones en México): 83–106.Google Scholar
Beltrán, Ulises. 2009b. “Publicidad y preferencias.” Política y Goberno Volumen Temático (Elecciones en México): 237–271.Google Scholar
Benton, Allyson Lucinda. 2008. “Do Investors Assess the Credibility of Campaign Commitments? The Case of Mexico's 2006 Presidential Race.” Political Research Quarterly 61 (3): 403–418.Google Scholar
Bernhard, William and Leblang, David. 2002. “Democratic Processes, Political Risk, and Foreign Exchange Markets.” American Journal of Political Science 46 (2): 316–333.Google Scholar
Bernhard, William and Leblang, David. 2006. Pricing Politics: Democratic Processes and Financial Markets. Cambridge: Cambridge University Press.Google Scholar
Białkowski, Jędrzej, Gottschalk, Katrin, and Wisniewski, Tomasz Piotr. 2008. “Stock Market Volatility Around National Elections.” Journal of Banking & Finance 32 (9): 1941–1953.Google Scholar
Block, Steven A., Schrage, Burkhard N., and Vaaler, Paul M. 2003. “Democracy's Spread: Elections and Sovereign Debt in Developing Countries.” Working Paper 575. Ann Arbor: The William Davidson Institute, University of Michigan Business School.Google Scholar
Calderón Hinojosa, Felipe. 2005. Diálogos por México. Distrito Federal, México: Televisa.Google Scholar
Suisse, Credit. 2006a. Measuring the Cost From Foreign Competition. Emerging Markets Economics: Mexico. New York: Credit Suisse.Google Scholar
Suisse, Credit. 2006b. State of Mexico Elections: Do they Matter? Emerging Markets Economics: Mexico. New York: Credit Suisse.Google Scholar
Suisse, Credit. 2006c. Trying to Make Sense of the Sell-off in Rates. Emerging Markets Economics: Mexico. New York: Credit Suisse.Google Scholar
Bank, Deutsche. 2006. Mexico: Oye como va. Industry Bulletin, Company Research. New York: Deutsche Bank.Google Scholar
Ejara, Demissew Diro, Nag, Raja, Upadhyaya, and Kamal P. 2012. “Opinion Polls and the Stock Market: Evidence from the 2008 U.S. Presidential Election.” Applied Financial Economics 22 (6): 437–443.Google Scholar
Fowler, James H. 2006. “Elections and Markets: The Effect of Partisanship, Policy Risk, and Electoral Margins on the Economy.” The Journal of Politics 68 (1): 89–103.Google Scholar
Franzese, Robert. 2002. “Electoral and Partisan Cycles in Economic Policies and Outcomes.” Annual Review of Political Science 5: 369–421.CrossRefGoogle Scholar
Freeman, John R., Hays, Jude C., and Stix, Helmut. 2000. “Democracy and Markets: The Case of Exchange Rates.” American Journal of Political Science 44 (3): 449–468.Google Scholar
Furió, Dolores and Pardo, Ángel. 2012. “Partisan Politics Theory and Stock Market Performance: Evidence for Spain.” Spanish Journal of Finance and Accounting 41 (155): 371–392.Google Scholar
Füss, Roland and Bechtel, Michael M. 2008. “Partisan Politics and Stock Market Performance: The Effect of Expected Government Partisanship on Stock Returns in the 2002 German Federal Election.” Public Choice 135 (3–4): 131–150.CrossRefGoogle Scholar
Garrett, Geoffrey. 1998. Partisan Politics in the Global Economy. Cambridge: Cambridge University Press.Google Scholar
Grayson, George W. 2007. Mexican Messiah: Andrés Manuel López Obrador. University Park: The Pennsylvania State University Press.Google Scholar
Herron, Michael C. 2000. “Estimating the Economic Impact of Political Party Competition in the 1992 British Election.” American Journal of Political Science 44 (2): 326–337.Google Scholar
Hibbs, Douglas A. 1987. The Political Economy of Industrial Democracies. Cambridge: Harvard University Press.Google Scholar
Jensen, Nathan M. and Schmith, Scott. 2005. “Market Responses to Politics: The Rise of Lula and the Decline of the Brazilian Stock Market.” Comparative Political Studies 38 (10): 1245–1270.Google Scholar
Knight, Brian. 2006. “Are Policy Platforms Capitalized into Equity Prices? Evidence from the Bush/Gore 2000 Presidential Election.” Journal of Public Economics 90 (4–5): 751–773.CrossRefGoogle Scholar
Lavelle, Kathryn C. 2004. The Politics of Equity Finance in Emerging Markets. New York: Oxford University Press.Google Scholar
Leblang, David and Mukherjee, Bumba. 2005. “Government Partisanship, Elections and the Stock Market: Examining American and British Stock Returns, 1930–2000.” American Journal of Political Science 49 (4): 781–803.Google Scholar
Leblang, David and Mukherjee, Bumba. 2007. “Elections, Partisan Politics and Stock Market Performance: Theory and Evidence from a Century of American and British Returns.” Economics and Politics 19 (2): 135–167.Google Scholar
Obrador, López, Manuel, Andrés. 2005a. Diálogos por México. Distrito Federal, México: Televisa.Google Scholar
Obrador, López, Manuel, Andrés. 2005b. Un Proyecto Alternativo de la Nación. Distrito Federal, México: Grijalbo Mondadori.Google Scholar
Mattozzi, Andrea. 2008. “Can We Insure Against Political Uncertainty? Evidence from the U.S. Stock Market.” Public Choice 137 (1): 43–55.Google Scholar
Mauser, Gary A. and Fitzsimmons, Craig. 1991. “The Short-Term Effect of Election Polls on Foreign Exchange Rates: The 1988 Canadian Federal Election.” Public Opinion Quarterly 55 (2): 232–240.Google Scholar
Maxfield, Sylvia. 1997. Gatekeepers of Growth: The International Political Economy of Central Banking in Developing Countries. Princeton: Princeton University Press.Google Scholar
McGillivray, Fiona. 2003. “Redistributive Politics and Stock Price Dispersion.” British Journal of Political Science 33: 367–395.Google Scholar
Medley Global Advisors. 2006a. Mexico: AMLO Lead in Polls Increasing. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006b. Mexico: Calderon Loses His Edge. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006c. Mexico: Calderon Receives Post-Debate Advantage. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006d. Mexico: Election Hinges on the Swing (Voters). New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006e. Mexico: Lopez Obrador to Support Current Debt Strategy. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006f. Mexico: Lopez Obrador's Economic Policy Priorities. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006g. Mexico: Lopez Obrador's Lead Narrows. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006h. Mexico: Presidential Race a Statistical Tie. New York: Medley Global Advisors.Google Scholar
Medley Global Advisors. 2006i. Mexico: Slight Edge to Lopez Obrador. New York: Medley Global Advisors.Google Scholar
Morgan, J.P. 2006. Special Report: Previewing Mexico's July 2 Presidential Election. Economic Research. Mexico City: J.P. Morgan.Google Scholar
Mosley, Layna. 2003. Global Capital and National Governments. New York: Cambridge University Press.Google Scholar
Mosley, Layna and Singer, David Andrew. 2008. “Taking Stock Seriously: Equity Market Performance, Government Policy, and Financial Globalization.” International Studies Quarterly 58 (2): 405–425.Google Scholar
Obstfeld, Maurice and Taylor, Alan M. 2004. Global Capital Markets: Integration, Crisis, and Growth. New York: Cambridge University Press.Google Scholar
Santiso, Javier. 2003. The Political Economy of Emerging Markets: Actors, Institutions, and Financial Crises in Latin America. New York: Palgrave Macmillan.Google Scholar
Simmons, Beth A. 1999. “The Internationalization of Capital.” In Continuity and Change in Contemporary Capitalism, edited by Kitschelt, Herbert, Lange, Peter, Marks, Gary and Stephens, John. New York: Cambridge University Press.Google Scholar
Standard & Poor's Ratings Services. 2012. Mexico: Heading into a New “Sexenio.” Credit Matters eReports. New York: Standard & Poor's Ratings Services.Google Scholar
Strange, Susan. 1996. The Retreat of the State: The Diffusion of Power in the World Economy. New York: Cambridge University Press.Google Scholar
Wibbels, Erik. 2006. “Dependency Revisited: International Markets, Business Cycles, and Social Spending in the Developing World.” International Organization 60 (2): 433–468.Google Scholar