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Political investing of mutual funds

Author

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  • Kong, Dongmin
  • Zhao, Zhao

Abstract

We study whether and how political investing influences the performance of mutual funds. We provide robust evidence of the positive relation between mutual funds' political connection intensity exposure and future performance. The gross return gap between the top and bottom quintiles of mutual funds ranked by exposure to political connection intensity reaches 4.38% on an annualized basis. The performance gap is larger and more significant for mutual funds with high characteristic-selectivity skills. Our findings show that political connection intensity exposure is more closely related to stock selection skill than to political investing risk premium, political investing timing ability or corruption.

Suggested Citation

  • Kong, Dongmin & Zhao, Zhao, 2024. "Political investing of mutual funds," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    • Handle: RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003600
    DOI: 10.1016/j.irfa.2024.103428
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    More about this item

    Keywords

    Mutual funds; Political connection; Stock selection skill; Risk premium; Corruption;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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