Political orientation and compensation for idiosyncratic risk

Seunghyup Lee

Economics Letters, 2022, vol. 218, issue C

Abstract: This paper presents evidence that idiosyncratic risk is better compensated when the population’s political balance is more liberal. Firm-level analysis indicates higher demand for idiosyncratic risk, lower demand for market risk, and more active stock-level arbitrage activities among conservative investors.

Keywords: Idiosyncratic risk; Return predictability; Political orientation; Risk preference (search for similar items in EconPapers)
JEL-codes: G11 G12 G41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002385

DOI: 10.1016/j.econlet.2022.110699

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