Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic
Forthcoming, Review of Asset Pricing Studies
56 Pages Posted: 7 Jun 2020 Last revised: 10 Sep 2020
Date Written: June 6, 2020
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