Is political popularity a sure sign of an impending crash?

A new leader takes power. They restore order to a country and embark on an ambitious series of political reforms. The economy is expected to improve as businesses become more confident, investment increases, and the country becomes more competitive. Investors, not surprisingly, will pile in, hoping to ride the boom.

In fact, however, they will be making a mistake. According to a fascinating new study by Helios Herrera, Guillermo Ordoñez and Christoph Trebesch, political popularity is the best single indicator that a market is about to crash. Instead of getting in, investors should be getting out of countries where political leaders [...]

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