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Stock prices and the SOTS

Wednesday, Jan 29, 2014

* Based on a recent study, you might wanna call your broker and buy some stock in Illinois-based companies this morning. Crain’s

The study looked at 388 state of the state speeches between 2002 and 2010, along with data on 5,271 publicly traded firms, including 211 in Illinois. Software called Diction 6.0 counted the positive and negative words in the speeches and scored them for net optimism, certainty and activity.

“The results show that firms that are located in a state where the governor gives a more optimistic speech are more likely to significantly increase investment and employment, and experience higher abnormal returns, relative to similar firms located in a neighboring state,” the study concluded.

In 2005, for example, former Gov. Rod Blagojevich’s state of the state speech scored 26.45 for net optimism, twice the nine-year average for all speeches nationwide. Illinois stocks beat the market by 1.59 percent that week, according to the study. In the 2010 election year, Mr. Quinn’s speech scored only 6.61 for net optimism, and the state’s stocks fell 0.5 percent.

The study controlled for variables such as the size of companies, the health of a state’s economy and even the possibility of media leaks before the speeches — leaving the speech itself the only variable.

“I was really surprised by the results,” said Larry Fauver, another co-author and associate professor of finance at University of Tennessee in Knoxville. “Most people are skeptical. I’m comfortable saying the correlation is 100 percent.”

The market react was supposedly even stronger in election years.

Discuss.

- Posted by Rich Miller        


8 Comments
  1. - wordslinger - Wednesday, Jan 29, 14 @ 10:00 am:

    Crain’s index of Illinois publicly traded companies was up 35% last year, outperforming the DJIA and the S&P 500.

    http://www.chicagobusiness.com/article/20131230/NEWS01/131229884/illinois-stocks-get-boost-from-u-s-equities-rally


  2. - PoolGuy - Wednesday, Jan 29, 14 @ 10:06 am:

    CNBC did the same thing this morning with SOTU and certain stocks going up. good stuff Rich.


  3. - walker - Wednesday, Jan 29, 14 @ 10:09 am:

    Maybe the Gov. reflects the mood of the “haves”, (I mean those wealthy “have-nots”), with whom he deals.


  4. - Anon - Wednesday, Jan 29, 14 @ 12:39 pm:

    == Crain’s index of Illinois publicly traded companies was up 35% last year, outperforming the DJIA and the S&P 500. ==

    How could that be if the Land of Lincoln is such a hellhole for business, as the GOP keeps insisting? Could it be the GOP is exaggerating a tad?


  5. - Formerly Known As... - Wednesday, Jan 29, 14 @ 1:31 pm:

    === How could that be if the Land of Lincoln is such a hellhole for business, as the GOP keeps insisting? ===

    Dominick’s, Office Depot, Health Care Centers of America and our December 2013 jobs report would like a word…

    Realistically, things are neither as bad as the GOP makes them out to be, nor as rosy as the Dems make them out to be. They both exaggerate.


  6. - wordslinger - Wednesday, Jan 29, 14 @ 1:41 pm:

    I don’t think Dominicks closed because of “business climate.” Last I checked, people are still eating.

    My Dominicks closed, but the market now has a Mejiers, Whole Foods, Trader Joes, Ultra Foods, WalMart, Target, that were not there 10 and 20 years ago.

    In a low-margin business, that’s a lot of competition.


  7. - PoolGuy - Wednesday, Jan 29, 14 @ 2:13 pm:

    with respect FKA, Office Depot/Office Max was a merger and they decided to stay in Florida where Office Depot already was. they didn’t go out of business. and ADM chose to say in Illinois too. neither Office Depot or ADM decisions were surprising. not all rosy but not all terrible as you say.


  8. - Formerly Known As... - Wednesday, Jan 29, 14 @ 2:55 pm:

    @PoolGuy & @Wordslinger - valid points, both.

    Those were just a few off the top of my head. Better examples may have been Cancer Treatment Centers of America, Modern Drop Forge, Olin Ammunition, Emco Chemical, or a quick google search before posting, lol.

    Or a link to this story from today’s Washington Post. Apparently Illinois has the 42nd-worst number of long-term unemployed: www.washingtonpost.com/blogs/govbeat/wp/2014/01/29/long-term-unemployment-is-at-record-highs-in-41-states/

    Regardless, agreed. The real picture is neither rosy nor pitch black at this point in time.


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