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Political Cognitive Biases Effects on Fund Managers' Performance

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  • Moszoro, Marian

Abstract

Does political affiliation matter for stock-market investing? Rare events can produce polarized narratives that potentiate cognitive dissonance on a spectrum of agents. Using a comprehensive dataset of equity hedge funds' performance and managers' political affiliation matched by their partisan contributions, I document higher returns of funds managed by Democrats for ten subsequent months—from December 2008 to September 2009—when the interpretation of the US central bank policy was politically polarized and conducive to cognitive dissonance. This result is robust to a set of falsification tests and randomized quasi-experiments.

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  • Moszoro, Marian, 2020. "Political Cognitive Biases Effects on Fund Managers' Performance," MPRA Paper 101572, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101572
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    More about this item

    Keywords

    Political Biases; Money Managers' Performance;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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