Department of Finance welcomes Professor Zhi Da to speak on April 9
The Department of Finance and the MS in Quantitative Finance (MSQF) program invite you to a seminar by Professor Zhi Da on Friday 4/9 at 1:30 pm via Zoom. Zhi is the Howard J. and Geraldine F. Korth Professor of Finance at the University of Notre Dame and is serving as Associate Editor at several top-tier journals, such as RFS, JFQA, and Management Science.
Join Zoom Meeting HERE
Meeting ID: 951 5030 1082
Dial-in number: 1 669 900 9128
Paper Title: Another Presidential Puzzle? Presidential Economic Approval Rating and the Cross-Section of Stock Returns
We construct a monthly Presidential Economic Approval Rating (PEAR) index from 1981 to 2019, by averaging ratings on president’s handling of the economy across various national polls. In the cross-section, stocks with high betas to changes in the PEAR index significantly under-perform those with low betas by 0.90% per month in the future, on a risk adjusted basis. The low-PEAR-beta
premium persists up to one year, and is present in various sub-samples (based on industries, presidential cycles, transitiohttps://www.unlv.edu/finance/seminarsns, and tenures) and even in other G7 countries. It is also robust to different risk adjustment models and controls for other related return predictors. Since the PEAR index is negatively correlated with measures of aggregate risk aversion, a simple risk model would predict the low PEAR-beta stocks to earn lower (not higher) expected returns. Contrary to the sentiment-induced overpricing, the premium does not come primarily from the short leg following high sentiment periods. Instead, the premium could be driven by a novel sentiment towards presidential alignment.
We have scheduled an exciting seminar series for this semester. You can see upcoming as well as past seminars on our seminar webpage.