Abstract
Political uncertainty represents a key determinant of corporate investment decisions. In this paper, we study the relation between political uncertainty and investment from the perspective of institutional investors. Using U.S. equity holdings data from 13F filings, we find that institutional investors herd during politically uncertain times. This trading behavior is stronger when U.S. presidents are unpopular, due to their proclivity for controversial policies, and among riskier stocks. We also find that this mechanism, despite generating some excess trading, helps incorporate a risk premium into stock prices. Overall, the findings unveil a new channel through which political uncertainty affects financial markets.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
