Are Intermediaries a Veil? Evidence from Fund Managers' Partisan Disagreement During the Coronavirus Crash
Blair Vorsatz, Finance PhD student
I study whether partisan disagreement about the severity of the coronavirus health crisis led to differential risk-taking and investment performance for mutual funds and hedge funds during the stock market crash. I link federal election contributions to fund managers to ascertain their political leaning, and use home addresses from the FEC database to measure county-level geographic salience in terms of confirmed coronavirus cases. I then test the following hypotheses:
- Republican (Democratic) fund managers increased (decreased) their equity exposure leading into the stock market crash, reflecting different partisan-based perceptions of risk.
- County-level salience (ie: more confirmed coronavirus cases) attenuates the magnitude of partisan-based disagreement.
Evidence in favor of these hypotheses would bring greater attention to fund manager preferences as an agency problem and contribute to the growing literature on intermediaries being marginal.