Treasury bond returns and U.S. political cycles

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

This work-project complements the existing studies on the linkage between financial investments returns and the political cycles, by relating Treasury bond returns and Presidential cycles. Previous research shows that stock market tends to behave better during Democratic presidencies, and in this work it is shown a compatible result, with long-term Treasury bonds having higher absolute, and excess returns during Republican Administrations. This difference is not explained by business cycles and there are no significant differences in risk, as measured by the volatility of returns, between the two political cycles. Empirical evidence is also found showing that there are better economic and financial conditions to invest in T-bonds' markets during Republican than during Democratic Administrations.