Fromme, the weapon didn’t fire and the
attempt had little if any effect on US equities.
In the second, the weapon fired but
Ford was unhurt; the following day, markets
fell roughly 0.5%.
The March 1981 attempt on the life
of Ronald Reagan was far more serious.
Today we know that if Hinckley’s bullet
had struck one inch to the right, or the
hospital had been farther away, the wound
would likely have been fatal. At the time,
Reagan’s injuries were described as serious
but survivable, and between the time
of the news release and the market’s 4:00
p.m. close, stocks fell roughly 0.25%. The
next day, stocks rallied strongly.
Assassinations
Bearing in mind that US equity markets
were orders of magnitude larger under
John F. Kennedy’s administration than
under Abraham Lincoln’s, presidential
assassinations have an extreme impact as
they bring to the fore existential political
fears. A 2014 Harvard University paper by
Baker, Frydman and Hilt entitled “From
Plutocracy to Progressivism? The Assassination
of President McKinley as a Turning
Point in American History” attests to the
importance of worries about policy. It finds
that “firms with vulnerability to antitrust
prosecution saw greater decreases in their
valuations following the assassination, suggesting
that regulatory forbearance was
an important mechanism by which firms
benefited during McKinley’s presidency.”
Lincoln’s murder occurred while
North-South tensions were still high following
the end of the Civil War. McKinley
was shot by a putative anarchist amid
growing concerns about armed leftists
and nihilist insurgents. Kennedy was shot
when the Cold War was heating up. As
Robert Stovall, then a 37-year-old director
of research at the erstwhile investment
bank E.F. Hutton in New York City,
recalled, “We thought the Kennedy assassination
might be followed up by an even
more serious incident.…We thought there
might be a follow-up attack.”
How did the killings affect markets?
Markets were closed the day Lincoln died
(Saturday, April 15); on Monday, April
17, they fell approximately 0.7%. James
A. Garfield was shot on July 2, 1882. That
day, stocks fell 3.3%. (He died just short
of 80 days later.) William McKinley was
shot on September 6, 1901 and died eight
days later. Equities on the New York Stock
Exchange fell 6.2% the following day.
And Kennedy was shot on November 22,
1963 and died shortly thereafter. Between
roughly 1:30 p.m. and 2:07 p.m. EST when
trading was halted, markets fell 2.8%.
25th Amendment
Section 4 of the 25th Amendment covers
the removal of a President who, owing to
physical or mental ailments, has become
unable to discharge the duties of office.
While it has never been invoked, perhaps
the closest approximation to the way the
stock market would react is exhibited
in the response to President Dwight D.
Eisenhower’s heart attack while playing
golf on September 24, 1955. (Today, over
90% of individuals suffering heart attacks
survive, but at that time the prospects
were grimmer.) Although he survived, the
Dow Jones Industrial Average fell over 6%
after the news was broadcast (see Table 3).
Impeachment
How have impeachments impacted markets?
We have three episodes for empirical
reference: the impeachment trials of
Andrew Johnson, Bill Clinton and Donald
Trump, all of which ended in acquittal.
TABLE 2: Stock Impact of Termination, Resignation or Death of Key Leaders
Source
Stock
Return
Exec/time period
Fortune (2019) –4.19% (CEOs; in the following 30 days vs. S&P500)
Agrawal & Chen (2017) –2.60% (directors; cumulative avg abnormal return
over day before and after)
Larker & Tayan (2012) –2.01% (CEOs; same day)
Salas (2010) –0.64% (CEOs; same day)
Worell, et al. (1993) 2.30% (Forced resignation of directors; same day)
Average return: –1.43%
Andrew Johnson
After discharging Secretary of War
Edwin Stanton, Johnson faced 11 articles
of impeachment. He was impeached in
February 1868 on charges of violating the
Tenure of Office Act; for voicing “intemperate,
inflammatory and scandalous
harangues” and “loud threats and bitter
menaces” against both Congress and the
laws of the United States; and for unlawfully
challenging the authority of the 39th
Congress. Between May 16, 1868 and May
26, 1868, first one article and then two
more were considered and failed to pass
the two-thirds-majority threshold. The
trial was adjourned, and the remaining
eight articles were dropped.
Bill Clinton
In December 1998, President Bill Clinton
faced two articles of impeachment for
perjury and obstructing justice relating to
the Monica Lewinsky scandal. On February
12, 1999, the Senate found Clinton not
guilty on both articles.
Donald Trump
President Donald Trump faced two articles
of impeachment which passed in
December 2019: one for abuse of power
and another for obstructing justice. The
case centered upon the alleged withholding
of military aid from Ukraine to induce
an investigation of Trump’s most likely
challenger in the 2020 election, former
Vice President Joe Biden. On February 5,
2020, the Senate found Trump not guilty
on both articles.
Findings and Conclusion
The actual US equity market reactions
to impeachments are shown in Table 4:
between the date of impeachment and
the vote date; intraday on the vote date;
and finally between the vote date and two
months later. This is a simple study, rife
like any other with hidden variables and
suffering from a small-n problem (three
events, with the first nearly a centuryand-a-half
before the other two), but a few
points are nevertheless clear.
We find straightforward, virtually
uniform negative responses among the
market reactions to the proposed constituent
elements of impeachment fears:
sudden uncertainty, key person concerns
28 FINANCIAL HISTORY | Summer 2020 | www.MoAF.org