…[political] platforms are capitalized into equity prices: under a Bush administration, relative to a counterfactual Gore administration, Bush-favored firms are worth 3-8 percent more and Gore-favored firms are worth 6-10 percent less. The most sensitive sectors include tobacco, worth 13-25 percent more under a favorable Bush administration, Microsoft competitors, worth 15 percent less under a favorable Bush administration, and alternative energy companies, worth 16-27 percent less under an unfavorable Bush administration.
This result was generated by correlating firm-specific equity returns with the Iowa Electronic [Presidential] Market forecasts. In other words, when Bush’s electoral fortunes went up, “Bush stocks” rose as well.
The bottom lines: 1) Overall the market did regard Bush as “better for business” than Gore. 2) Equity markets moved more rapidly than did the Iowa markets. 3) If the outcome of a Presidential election truly matters to you, your position can be hedged fairly easily. 4) Presumably there are “John Kerry stocks” right now.
Thanks to Eric Crampton for the pointer.