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Abstract

Investors are constantly trying to find edge that will make them more successful than their peers. It is for this reason that analysts aim to correlate all aspects of the financial world to produce this edge. For years, scholars and analysts have struggled to find how if at all, politics affect stock market valuations. If they are able to find statistically significant evidence the market reacts differently to political events such as the incumbent president’s policy bias or congressional majority changes, they can invest accordingly. Common theories point out that Republicans are generally superior to Democrats in regards to the performance of the stock market during their respective terms. Theory also suggests presidents are more likely to perform better in the first and last years of their term. Therefore election timing must be reviewed to realize its implications for an above or below average stock index performance. It is the goal of this paper to test these theories so any hypothesis about partisan politics or election timing can be proven genuine or laid to rest.

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