Hedge fund politics and portfolios

Luke DeVault, Richard W Sias

Research output: Contribution to journalArticle

1 Scopus citations

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
Publication statusPublished - Feb 1 2017

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Keywords

  • Hedge funds
  • Political orientation
  • Portfolio decisions
  • Psychology

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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