Political Partisan Bias in Mutual Fund Portfolios
50 Pages Posted: 16 Mar 2017 Last revised: 14 Aug 2017
Date Written: March 9, 2017
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: Suggested Citation