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Red and blue investing: Values and finance

  • Hong, Harrison
  • Kostovetsky, Leonard
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X11000304
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    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 103 (2012)
    Issue (Month): 1 ()
    Pages: 1-19

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    Handle: RePEc:eee:jfinec:v:103:y:2012:i:1:p:1-19
    DOI: 10.1016/j.jfineco.2011.01.006
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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    9. Daniel, Kent, et al, 1997. " Measuring Mutual Fund Performance with Characteristic-Based Benchmarks," Journal of Finance, American Finance Association, vol. 52(3), pages 1035-58, July.
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    11. Tesar, Linda L. & Werner, Ingrid M., 1995. "Home bias and high turnover," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 467-492, August.
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