Monday, August 09, 2010

Congress is Bad for Business

Or at least when it is in session:
Stock returns are lower and volatility is higher when Congress is in session. This "Congressional Effect" can be quite large - more than 90% of the capital gains over the life of the DJIA have come on days when Congress is out of session. The Effect varies systematically with the public's opinion of Congress: returns are lower and volatility higher when a relatively unpopular Congress is active.
It suggests that government activity increases regulatory uncertainty. Hat tip to Freakonomics.


  1. "This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer." Will Rogers

  2. Kind of makes you wish for the good ol' days when they didn't spend so much time in session.

    Also, wonder if this correlates to states as well. Some states only spend ~45 days in legislative sessions. Others have full-time legislators (cough, California, cough).


You are the reason why I do not write privately. I would love to hear your thoughts, whether you agree or not.