Munich Personal RePEc Archive

Political Cognitive Biases Effects on Fund Managers' Performance

Moszoro, Marian (2020): Political Cognitive Biases Effects on Fund Managers' Performance. Published in: Journal of Behavioral Finance No. Forthcoming (2020): pp. 2-19.

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Does political affiliation matter for stock-market investing? Rare events can produce polarized narratives that potentiate cognitive dissonance on a spectrum of agents. Using a comprehensive dataset of equity hedge funds' performance and managers' political affiliation matched by their partisan contributions, I document higher returns of funds managed by Democrats for ten subsequent months—from December 2008 to September 2009—when the interpretation of the US central bank policy was politically polarized and conducive to cognitive dissonance. This result is robust to a set of falsification tests and randomized quasi-experiments.

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