Partisan Bias in Fund Portfolios

Journal of Financial & Quantitative Analysis, Forthcoming

86 Pages Posted: 16 Mar 2017 Last revised: 15 Jan 2019

See all articles by M. Babajide Wintoki

M. Babajide Wintoki

University of Kansas - School of Business

Yaoyi Xi

University of Kansas

Date Written: January 10, 2019

Abstract

We document that 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. Funds with more partisan bias suffer from higher levels of idiosyncratic volatility than those with less bias. Partisan bias is more evident when fund managers are less experienced, in more informationally opaque firms, and when the U.S. president comes from fund managers’ own party. These findings suggest that political partisan bias among fund managers may be due to in-group favoritism.

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

JEL Classification: G11, G02

Suggested Citation

Wintoki, Modupe Babajide and Xi, Yaoyi, Partisan Bias in Fund Portfolios (January 10, 2019). Journal of Financial & Quantitative Analysis, Forthcoming. 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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