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Evaluating the Empirical Effect of U.S. Presidential Elections Research Methods Christine Panasian and Yermek Mustafayev Abstract This paper analyzes the effect of the 2000 U.S. presidential elections on ten U.S. industries, assumed to be the most affected by the election outcomes. The industries are selected by carefully evaluating the political platforms of the two presidential candidates G. W. Bush for Republicans and A. Gore for Democrats. Then, portfolios are formed of these industries in total, as well as divided on size (top 25% and bottom 25% of the companies) and an event study is performed in order to capture the abnormal returns during the election window of 37 days. Little significant abnormal returns are found for the entire election window, but significance is present for the abnormal return of Day 34, the final decision day, and the expected signs are confirmed. Cross-sectional results show strong sign effects based on size and more moderate with respect to the hypothesized political outcome. Furthermore, the coefficients obtained from the cross-sectional regression exhibit the expected opposite signs when they are supported by different candidates. Introduction In an efficient market setting, prices are expected to reflect all available information. Even a weaker form of this hypothesis, which relaxes some of the assumptions and makes the theory get closer to reality, still assumes that stock price returns react very fast to new information that becomes available in the marketplace. This information can be coming from a variety of sources: company specific information, economic news or even political news. Although an incredible amount of literature exists on the efficiency of stock prices to incorporate macro and micro-economic news and changes of economic fundamentals like capital structure, dividend announcements and bond issues, little empirical work has been done to evaluate the effects of political events announcements on finan