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In the working paper “Does Partisanship Shape Investor Beliefs? Evidence from the COVID-19 Pandemic” Associate Professor Tony Cookson and researchers from the Rady School of Management investigate the link between political affiliation and expectations about future stock market performance.

Researchers Joey Engelberg and Will Mullins, along with Cookson analyzed approximately 5 million posts on the investor social media platform before versus during the COVID-19 pandemic. Specifically, they used posts before the COVID-19 period to identify when a user was Republican, based on their use of political keywords, such as “Liberal Media” and “MAGA.”

Building on this classification, they used a unique feature of StockTwits – that users tag their views as optimistic (bullish) or pessimistic (bearish) when they post to the platform – to track how Republicans’ versus others’ beliefs about stocks changed during the pandemic. Strikingly, Republicans were much more optimistic during the pandemic than other users.

The paper found two other notable findings.

First, the optimism of Republicans was not universal across all types of stocks. Consistent with Republican political views, the researchers found that Republicans became more pessimistic about Chinese stocks during the pandemic, and that the pessimism peaked in mid-March when China was politicized in the US (but opening up economically).

Second, the difference of opinions on the basis of political views was important for the dramatic spike in trading during COVID-19. The amount of trading in stocks increased by about 40% during the pandemic. Approximately 20% of the rise in trading was attributable to divergence of partisan opinion about stocks.

Cookson and his fellow researchers note that it should surprise no one that partisans disagree. However, the fact that partisan disagreement affects stock investing – an arena with very high personal stakes – underscores just how politicized our society has become.