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

45 Pages Posted: 7 Jun 2020

See all articles by J. Anthony Cookson

J. Anthony Cookson

University of Colorado at Boulder - Leeds School of Business

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

William Mullins

University of California, San Diego (UCSD) - Rady School of Management

Date Written: June 6, 2020

Abstract

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, which explains 20% 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

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

J. Anthony Cookson (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

William Mullins

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

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