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Portfolio's weighted political risk and mutual fund performance: A text-based approach

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  • Nguyen, Huong Giang
  • Hoang, Khanh
  • Nguyen, Quan M.P.
  • Do, Hung Xuan
  • Nguyen, Duc Khuong

Abstract

Using text-based measures of firm-level political risk, we find a negative impact of the portfolio's weighted political risk on U.S. mutual fund performance. This relationship is robust to a wide range of topic-specific political risks at the firm level. We, however, find that national geopolitical risk, the U.S. state-level economic policy uncertainty, and Brexit-induced risk do not affect mutual fund performance. Our results suggest that even though mutual funds are immune from political risk at the macro level, they are significantly exposed to idiosyncratic political risk. We also demonstrate that partisanship matters to mutual fund performance.

Suggested Citation

  • Nguyen, Huong Giang & Hoang, Khanh & Nguyen, Quan M.P. & Do, Hung Xuan & Nguyen, Duc Khuong, 2024. "Portfolio's weighted political risk and mutual fund performance: A text-based approach," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400758x
    DOI: 10.1016/j.frl.2024.105728
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    More about this item

    Keywords

    Brexit risk; Geopolitical risk; Mutual fund; Performance; Policy uncertainty; Political risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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