Study: Stock market election predictor

Sept. 28, 2012 at 12:18 AM

GAINESVILLE, Ga., Sept. 28 (UPI) -- Forget the unemployment rate or the price of gasoline, U.S. and British researchers suggest the stock market is the best predictor of the presidential election.

Robert R. Prechter Jr. and Deepak Goel, both of the Socionomics Institute; Wayne D. Parker of Emory University School of Medicine; and Matthew Lampert of the University of Cambridge in England said they analyze all U.S. presidential election bids. Socionomics is a field of study deriving from the hypothesis that social mood motivates the character of social action.

"We found a positive, significant relationship between the incumbent's vote margin and the prior net percentage change in the stock market," the researchers said. "This relationship does not extend to the incumbent's party when the incumbent does not run for re-election."

The study found no significant relationships between the incumbent's vote margin and inflation or unemployment.

The results were consistent with socionomic voting theory, which includes the hypotheses that social mood as reflected by the stock market was a more powerful regulator of re-election outcomes than economic variables such as GDP, inflation and unemployment; and voters unconsciously credit or blame the leader for their mood, the study said.

The findings were published in the Social Science Research Network.

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