Red and blue investing: Values and finance

Harrison Hong and Leonard Kostovetsky

Journal of Financial Economics, 2012, vol. 103, issue 1, 1-19

Abstract: Using data on the political contributions and stock holdings of U.S. investment managers, we find that mutual fund managers who make campaign donations to Democrats hold less of their portfolios (relative to non-donors or Republican donors) in companies that are deemed socially irresponsible (e.g., tobacco, guns, or defense firms or companies with bad employee relations or diversity records). Although explicit socially responsible investing (SRI) funds are more likely to be managed by Democratic managers, this result holds for non-SRI funds and after controlling for other fund and manager characteristics. The effect is more than one-half of the underweighting observed for SRI funds.

Keywords: Mutual funds; Political values; Portfolio decisions; SRI (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (239)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:103:y:2012:i:1:p:1-19

DOI: 10.1016/j.jfineco.2011.01.006

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