2016 Presidential Election - The Winners and Losers in the Health Care Industry

Abstract

The 2016 presidential election had important implications for the country’s health care policies. In this study, we examine the health care industry stock returns associated with the 2016 presidential campaign. We use both market model and seemingly unrelated regression (SUR) methodologies to estimate abnormal stock returns of each health care sector associated with each event. Our results are robust and mostly consistent with our arguments. The regression analysis further augments our event study results. We find that, during the pre-election period, the Biological Products, Health Insurance, and Major Pharmaceuticals all suffer significantly negative cumulative average abnormal returns (CAARs). The Hospital/Nursing Management and Medical/Dental Instruments fare reasonably well. Our interpretation is that the market takes a dim view on the Biological Products, Health Insurance, and Major Pharmaceuticals sectors when the consensus is that Clinton would win the election. When the election is over, the fortune reverses for the Biological Products and Major Pharmaceuticals. It continues when President Trump meets with the health care industry CEOs. The regression results further confirm our event study results. Our study shows that the 2016 election has a significant impact on the affected industry and the firms in the industry. However, even in the same broad industry, sectors/firms fare differently. Our study shows that it is important to identify the winning and losing sectors and examine the impact of an election on various sectors in a detailed and refined way.