Interest group activity and long-run stock market performance

Abstract

Special interest groups, Institutional sclerosis, Stock returns, Volatility, D7, G1, G3, L5, O16,

Special-Interest Groups and Volatility

“…In addition, special-interest group activity has been empirically linked to profit stream and stock return volatility (Grier, Munger, and Roberts, 1994;Coates and Wilson, 2007). Our findings indicate that special-interest group activity is also a determinant of the volatility of GDP growth.…”

“…The counts are assembled using the 1973, 1985, and 1995 editions of the World Guide to Trade Associations. Counts from the Guide have also been used by Heckelman (2000), Coates and Heckelman (2003b), and Coates and Wilson (2007) in studies of growth determinants, and by Murrell (1984), Kennelly and Murrell (1991), Bischoff (2003), and Coates, Heckelman, and Wilson (2007a) in studies of interest group formation. The Guide is an international directory of "trade associations," covering more than 170 countries, and nearly 400 categories of groups.…”

“…Special-interest groups have been empirically linked to numerous political and economic outcomes -the voting behavior of politicians and election results (Stratmann, 1992(Stratmann, , 1998(Stratmann, , 2002Coates, 1996), product prices (Ellison and Wolfram, 2001), market capitalization and stock returns (Roberts, 1990;Jayachandran, 2006;Coates and Wilson, 2007), financial sector policy (Kroszner and Strahan, 1999;Rajan and Zingales, 2003), and investment and growth (Heckelman, 2000;Coates andHeckelman, 2003a and2003b;Coates, Heckelman, and Wilson, 2007b). In addition, special-interest group activity has been empirically linked to profit stream and stock return volatility (Grier, Munger, and Roberts, 1994;Coates and Wilson, 2007).…”

Special-interest groups and growth

“…Effectively, Olson assumes that interest representation by groups remains sufficiently incomplete, and/or formation and bargaining costs are sufficiently large, that inefficiencies continue to accumulate as activity increases over time. et al (2007a) to study interest group formation, by Mueller and Murrell (1986) in a study of government size, by Coates and Wilson (2007) in a study of aggregate stock market performance, by Heckelman (2000), Heckelman (2003a, 2003b), and Coates et al (2007bCoates et al ( , 2010 in studies of growth, investment, and growth volatility. Coates et al (2007a) find that well over 70% of variation in group counts assembled from the Guide can be explained by a relatively small number of (theoretically motivated) variables-in both rich and poor countries.…”

“…Other influences, however, may mask both Olsonian and convergence effects in bivariate correlations. For example, groups have been negatively linked to growth volatility (Grier et al 1994;Coates and Wilson 2007;Coates et al 2007b). To the extent that volatility is negatively associated with growth and groups proxy for volatility, these relationships may explain the positive correlations.…”