Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic

We use party-identifying language – like “Liberal Media” and “MAGA”– to identify Republican users on the investor social platform StockTwits. Using a difference-in-difference design, we find that the beliefs of partisan Republicans about equities remain relatively unfazed during the COVID-19 pandemic, while other users become considerably more pessimistic. In cross-sectional tests, we find Republicans become relatively more optimistic about stocks that suffered the most from COVID-19, but more pessimistic about Chinese stocks. Finally, stocks with the greatest partisan disagreement on StockTwits have significantly more trading in the broader market, explaining 28% of the increase in stock turnover during the pandemic.

Keywords: COVID-19, partisanship, investor beliefs, disagreement, trading volume

JEL Classification: G12, D91, P16

Suggested Citation: Suggested Citation

Cookson, J. Anthony and Engelberg, Joseph and Mullins, William, Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic (June 6, 2020). Forthcoming, Review of Asset Pricing Studies, Available at SSRN: https://ssrn.com/abstract=3621067 or http://dx.doi.org/10.2139/ssrn.3621067