Portfolio's weighted political risk and mutual fund performance: A text-based approach

Huong Giang Nguyen, Khanh Hoang, Quan M.P. Nguyen, Hung Xuan Do and Duc Khuong Nguyen

Finance Research Letters, 2024, vol. 66, issue C

Abstract: Using text-based measures of firm-level political risk, we find a negative impact of the portfolio's weighted political risk on U.S. mutual fund performance. This relationship is robust to a wide range of topic-specific political risks at the firm level. We, however, find that national geopolitical risk, the U.S. state-level economic policy uncertainty, and Brexit-induced risk do not affect mutual fund performance. Our results suggest that even though mutual funds are immune from political risk at the macro level, they are significantly exposed to idiosyncratic political risk. We also demonstrate that partisanship matters to mutual fund performance.

Keywords: Brexit risk; Geopolitical risk; Mutual fund; Performance; Policy uncertainty; Political risk (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400758x

DOI: 10.1016/j.frl.2024.105728

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