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Does the stock market stir when the Oval Office switches parties?

Control of the White House has only changed parties three times in the life of BYU undergrad Ian Wright, yet he’s undertaken a project to answer whether change in the Oval Office stirs the stock market.

An economics and mathematics major, Wright and his mentor – finance professor Keith Vorkink – became intrigued by prior research that suggested a correlation between the party in power and stock returns. The pair developed statistical models to rigorously test the idea and applied for an ORCA grant to aid the effort.

Now Wright is running statistical tests on monthly stock returns during presidencies since WWII, and is looking to see if there is a significant relationship between presidential partisanship and returns in the stock market. Wright will also look at the number of terms served to see if presidential tenure plays a role.

With his preliminary findings showing no robust relationship, Wright is making sure to cover all of his bases in his research. However, he thinks the market might put more weight on the individual agenda of each president and not react simply to party labels.

“To me it seems logical that there wouldn’t be a relationship simply between partisanship and returns,” Wright said. “It seems that the market knows the party of who is elected, the market knows who the president is and what policies they might implement.”

Wright plans to study behavioral finance in graduate school. He has applied to programs at Harvard, Stanford, MIT and University of Chicago.

Writer: Ashley Fickenwirth


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