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Investing with a political lens: Partisanship and stock market predictions in Japan

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  • Ohmura, Hanako

Abstract

Global interest in the effects of partisanship on economic behavior has surged in recent years. To investigate this phenomenon outside the United States and other Western democracies, I conducted a nationwide online survey of Japanese citizens, asking them to forecast the Nikkei225 at horizons of one month, six months, one year, and 10 years. Using perceptions of political corruption as an instrument for partisanship, I find that in-partisan stockholders predict significantly higher future prices than out-partisans and independents, with a ten-year forecast gap of up to JPY 31,138 (≈ USD 212). Paradoxically, in-partisan shareholders also deliver the most accurate forecasts at one month, six months, and one year. These findings demonstrate that partisan-motivated reasoning (PMR) exerts a tangible influence on investment behavior well beyond the US and other Western democracies, and critically suggest that, depending on context, the directional and accuracy goals of PMR can coexist, driving both biased optimism and forecasting precision.

Suggested Citation

  • Ohmura, Hanako, 2025. "Investing with a political lens: Partisanship and stock market predictions in Japan," Finance Research Letters, Elsevier, vol. 86(PA).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pa:s1544612325014989
    DOI: 10.1016/j.frl.2025.108244
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    Keywords

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    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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