Political Partisan Bias in Mutual Fund Portfolios

50 Pages Posted: 16 Mar 2017 Last revised: 14 Aug 2017

See all articles by M. Babajide Wintoki

M. Babajide Wintoki

University of Kansas - School of Business

Yaoyi Xi

University of Kansas

Date Written: March 9, 2017

Abstract

We present evidence that mutual fund managers are more likely to allocate assets to firms managed by executives and directors with whom they share a similar political partisan affiliation. We find that this bias is not associated with improved fund performance, suggesting that it is not due to superior information. Funds with more partisan bias suffer from higher levels of idiosyncratic volatility than those with less bias. Partisan bias is more evident when the fund manager is less experienced, in firms with more opaque information environments, and when the President of the U.S. comes from the fund manager’s own party.

Keywords: Mutual funds, Political Ideology, Partisanship, Partisan Bias

JEL Classification: G11, G02

Suggested Citation

Wintoki, Modupe Babajide and Xi, Yaoyi, Political Partisan Bias in Mutual Fund Portfolios (March 9, 2017). Available at SSRN: https://ssrn.com/abstract=2933270 or http://dx.doi.org/10.2139/ssrn.2933270

Modupe Babajide Wintoki (Contact Author)

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

Yaoyi Xi

University of Kansas

1415
Lawrence, KS 66045
United States

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