Hedge fund politics and portfolios

Luke DeVault, Richard W Sias

Research output: Contribution to journalArticle

Abstract

Consistent with the well-documented relation between political orientation and psychological traits, hedge funds’ political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller stocks, less mature companies, volatile stocks, unprofitable companies, non-dividend paying companies, and lottery-type securities. Politically liberal hedge funds are also more likely to enter new positions or fully exit existing positions, and make larger adjustments to their U.S. equity market exposure. Our results suggest that psychological characteristics can influence the portfolio decisions of even those at the very top of the financial sophistication ladder.

Original languageEnglish (US)
Pages (from-to)80-97
Number of pages18
JournalJournal of Banking and Finance
Volume75
DOIs
StatePublished - Feb 1 2017

Fingerprint

Hedge funds
Psychological
Equity markets
Lottery
Exit
Sophistication

Keywords

  • Hedge funds
  • Political orientation
  • Portfolio decisions
  • Psychology

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

Hedge fund politics and portfolios. / DeVault, Luke; Sias, Richard W.

In: Journal of Banking and Finance, Vol. 75, 01.02.2017, p. 80-97.

Research output: Contribution to journalArticle

@article{1dab2b8fda4f4930b323c98289aaa0f9,
title = "Hedge fund politics and portfolios",
abstract = "Consistent with the well-documented relation between political orientation and psychological traits, hedge funds’ political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller stocks, less mature companies, volatile stocks, unprofitable companies, non-dividend paying companies, and lottery-type securities. Politically liberal hedge funds are also more likely to enter new positions or fully exit existing positions, and make larger adjustments to their U.S. equity market exposure. Our results suggest that psychological characteristics can influence the portfolio decisions of even those at the very top of the financial sophistication ladder.",
keywords = "Hedge funds, Political orientation, Portfolio decisions, Psychology",
author = "Luke DeVault and Sias, {Richard W}",
year = "2017",
month = "2",
day = "1",
doi = "10.1016/j.jbankfin.2016.10.011",
language = "English (US)",
volume = "75",
pages = "80--97",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",

}

TY - JOUR

T1 - Hedge fund politics and portfolios

AU - DeVault, Luke

AU - Sias, Richard W

PY - 2017/2/1

Y1 - 2017/2/1

N2 - Consistent with the well-documented relation between political orientation and psychological traits, hedge funds’ political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller stocks, less mature companies, volatile stocks, unprofitable companies, non-dividend paying companies, and lottery-type securities. Politically liberal hedge funds are also more likely to enter new positions or fully exit existing positions, and make larger adjustments to their U.S. equity market exposure. Our results suggest that psychological characteristics can influence the portfolio decisions of even those at the very top of the financial sophistication ladder.

AB - Consistent with the well-documented relation between political orientation and psychological traits, hedge funds’ political orientations are related to their portfolio decisions. Relative to politically conservative hedge funds, politically liberal hedge funds exhibit a preference for smaller stocks, less mature companies, volatile stocks, unprofitable companies, non-dividend paying companies, and lottery-type securities. Politically liberal hedge funds are also more likely to enter new positions or fully exit existing positions, and make larger adjustments to their U.S. equity market exposure. Our results suggest that psychological characteristics can influence the portfolio decisions of even those at the very top of the financial sophistication ladder.

KW - Hedge funds

KW - Political orientation

KW - Portfolio decisions

KW - Psychology

UR - http://www.scopus.com/inward/record.url?scp=84997703798&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84997703798&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2016.10.011

DO - 10.1016/j.jbankfin.2016.10.011

M3 - Article

AN - SCOPUS:84997703798

VL - 75

SP - 80

EP - 97

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

ER -