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Keywords:

  • Political economy;
  • Presidential approval;
  • VIX

Recently, market volatility has been used as an explanatory variable for presidential job approval. Our research builds on such an approach by first extracting the economic and non-economic components of market volatility using the Eta® (c4cast.com, Inc., 750 E. Walnut St., Pasadena, CA 91101) model, which considers 18 economic factors, far more than the unemployment and inflation factors used in most similar studies. Further, our results suggest that it is not aggregated market volatility but rather disaggregated market volatility that has a causal effect on presidential job approval ratings. In addition, the market's expectation of economic and non-economic market volatility exhibits different patterns, in terms of direction and timing, in their relationship to presidential job approval ratings. Copyright © 2011 John Wiley & Sons, Ltd.