Belief Disagreement and Portfolio Choice

59 Pages Posted: 1 Oct 2018 Last revised: 7 Feb 2022

See all articles by Maarten Meeuwis

Maarten Meeuwis

Washington University in St. Louis - John M. Olin Business School

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Duncan Simester

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 2018

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.

Suggested Citation

Meeuwis, Maarten and Parker, Jonathan A. and Schoar, Antoinette and Simester, Duncan, Belief Disagreement and Portfolio Choice (September 2018). NBER Working Paper No. w25108, Available at SSRN: https://ssrn.com/abstract=3258206

Maarten Meeuwis (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

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Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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National Bureau of Economic Research (NBER)

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Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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Duncan Simester

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Management Science
Cambridge, MA 02142
United States
617-258-0679 (Phone)
617-258-7597 (Fax)

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