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Belief Disagreement and Portfolio Choice
Author(s) -
MEEUWIS MAARTEN,
PARKER JONATHAN A.,
SCHOAR ANTOINETTE,
SIMESTER DUNCAN
Publication year - 2022
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13179
Subject(s) - equity (law) , portfolio , initial public offering , ex ante , economics , financial market , monetary economics , financial economics , business , presidential system , finance , macroeconomics , politics , political science , law
Using proprietary financial data on millions of households, we show that likely‐Republicans increased the equity share and market beta of their portfolios following the 2016 presidential election, while likely‐Democrats rebalanced into safe assets. We provide evidence that this behavior was driven by investors interpreting public information based on different models of the world. We use detailed controls to rule out the main nonbelief‐based channels such as income hedging needs, preferences, and local economic exposures. These findings are driven by a small share of investors making big changes, and are stronger among investors who trade more ex ante.