Gridlock's Gone, Now What?

Posted: 9 Oct 2006

See all articles by Scott Beyer

Scott Beyer

Univeristy of Wisconsin Oshkosh

Gerald R. Jensen

Northern Illinois University

Robert R. Johnson

Creighton University - College of Business Administration


This article examines the relationship between security returns and political gridlock, which occurs when the U.S. House of Representatives, Senate, and presidency are not controlled by the same political party. The findings support the following conclusions: First, the common view that equities prosper during political gridlock is a myth. Second, fixed-income securities do prosper during gridlock. Third, large companies exhibit higher returns than small companies during gridlock. Finally, the relationship between gridlock and security returns is independent of monetary conditions; this finding supports the existence of a unique gridlock effect. Overall, political conditions are relevant for investors, but previous views about their influence are misguided.

Keywords: Portfolio Management, Equity Strategies, Debt Strategies, Economics, Relationship of Economic Activity to the Investment Process

Suggested Citation

Beyer, Scott and Jensen, Gerald and Johnson, Robert R., Gridlock's Gone, Now What?. Financial Analysts Journal, Vol. 62, No. 5, pp. 21-28, October 2006, Available at SSRN:

Scott Beyer

Univeristy of Wisconsin Oshkosh ( email )

800 Algoma Blvd
Oshkosh, WI WI 54901
United States
9204247194 (Phone)

Gerald Jensen

Northern Illinois University ( email )

Barsema Hall
Finance Department
DeKalb, IL 60115
United States
815-753-6399 (Phone)

Robert R. Johnson (Contact Author)

Creighton University - College of Business Administration ( email )

United States
4342492805 (Phone)

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