Belief Disagreement and Portfolio Choice

118 Pages Posted: 11 Oct 2021

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 30, 2021

Abstract

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 using different models of the world by using detailed controls to rule out the main non-belief-based channels like 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.

Suggested Citation

Meeuwis, Maarten and Parker, Jonathan A. and Schoar, Antoinette and Simester, Duncan, Belief Disagreement and Portfolio Choice (September 30, 2021). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3934061

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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