Political Cycles and Stock Returns
构建了一个模型，解释风险厌恶随时间变化如何驱动政治周期，并预测民主党执政期间股票市场回报更高，从而解释了“总统之谜”。
We develop a model of political cycles driven by time-varying risk aversion. Agents choose to work in the public or private sector and to vote Democratic or Republican. In equilibrium, when risk aversion is high, agents elect Democrats—the party promising more redistribution. The model predicts higher average stock market returns under Democratic presidencies, explaining the well-known “presidential puzzle.” The model can also explain why economic growth has been faster under Democratic presidencies. In the data, Democratic voters are more risk averse, and risk aversion declines during Democratic presidencies. Public workers vote Democratic, while entrepreneurs vote Republican, as the model predicts.