DP8713 Hope, Change, and Financial Markets: Can Obama's Words Drive the Market?

Author(s): Sharmin Sazedj, José Tavares
Publication Date: December 2011
Keyword(s): Barack Obama, financial markets, political economy, speech content
JEL(s): E44, G12, G14, H12, O51
Programme Areas: Public Economics, Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8713

Barack Obama?s victory in the 2009 presidential elections in the United States is widely credited to his personal charisma and his extraordinary rhetorical powers, as revealed throughout the campaign. President Obama was inaugurated in the midst of the worst economic crisis in the country, when individuals and organizations yearned for leadership and signs of change. We code an array of rhetorical features in Obama´s main speeches and press conferences and assess their impact on stock returns of the Dow Jones, S&P 500, and NASDAQ indices, at 3 and 7 day time horizons. We find that words matter. Paragraphs matter, too. We also uncover how some of Obama´s rhetorical abilities that are politically effective seem to be perceived negatively by economic agents, and have a significant negative impact on stock returns.