Do Political Contributions Actually Affect Stock Price?

Includes: BAC, C, CS, GS, JPM, LEH, MER, MS, UBS, WFC
by: Nick Gogerty

The new site is out and it is fun. You can see which industries and participants contribute politically and to whom. So the question these days is where to get a good return on your money, or more importantly, the return of your money.

Here are the contributions of a handful of banks in the 2008 political cycle.
Does this pay? I constructed a Naive index of equally weighted banks and investment banks and compared it with a political contribution weighted index starting in Jan 1 2007.

It turns out the political contribution weighted index yields an extra 575 Bps of extra Alpha over the 2.4 years. Of course -70% versus -75% isn't exactly a one way to ticket to super happy bonus land. This is far from a rigorous analysis for a whole host of reasons.

I hope some snappy grad student out there does some work on this across sectors and companies. After all this is America and if you are paying for influence, shouldn't you get it? ;)

Not a big deal, but maybe if Lehman and Bear would have been a little looser with the ole pocket change in DC....

Here is the spreadsheet Download PoliticalPortfolio