Working Paper: NBER ID: w25108
Authors: Maarten Meeuwis; Jonathan A. Parker; Antoinette Schoar; Duncan I. Simester
Abstract: Using proprietary portfolio data on millions of households, we show that (likely) Republicans increase the equity share and market beta of their portfolios following the 2016 presidential election, while (likely) Democrats rebalance into safe assets. We provide evidence that this behavior is driven by investors interpreting public information using different models of the world, by ruling out the main non-belief-based channels (like income hedging needs, preferences, local economic exposure) using detailed controls for ex ante wealth and investments, demographics and income, and even county-employer-period fixed effects. These findings are driven by a small share of investors making big changes in allocation, and are stronger among investors who are more attentive to their portfolios or who do not delegate their investment decisions.
Keywords: Portfolio Choice; Political Affiliation; Equity Share; Market Beta
JEL Codes: D14; D84; E71; G11; G12; G40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| likely Republicans (D72) | equity share (D33) |
| likely Republicans (D72) | market beta (G10) |
| likely Democrats (D72) | rebalance into safer assets (G11) |
| political affiliation (D72) | expectations about economic impacts (F69) |
| expectations about economic impacts (F69) | portfolio adjustments (G11) |