William (Will) Cassidy

Working Papers

Partisanship and Portfolio Choice: Evidence from Mutual Funds

(with Blair Vorsatz)
Awards: FMCG Best Paper Award Behavioral Finance
Presentations: Stigler Center Workshop in Political Economy, LSU Finance, Financial Markets and Corporate Governance Conference, 10th Helsinki Finance Summit on Investor Behavior

Abstract: Political beliefs matter for the behavior of institutional investors. Contrary to conventional wisdom, we show that whether a mutual fund team is Republican or Democratic has a first-order effect on the fund's portfolio choice. Before and after the 2016 Presidential election, Republican teams actively purchase more equity, especially in high beta industries. Around the 2020 election, Democratic teams do the same. The flip in trading behavior rules out conventional risk aversion-based explanations for the role of partisanship. Instead, political beliefs appear to drive this trading, with managers appearing more optimistic when their political party wins the presidency. These effects are also present in 2012 but have grown over time.

Policy Opacity

Revised March 2022
Awards: Arnold Zellner Doctoral Prize 2022
Presentations: AFA 2022 Student Poster Session, SWFA 2022, Eastern Finance Association 2022, Chicago Booth, UChicago Joint Program and Friends Conference, Dauphine Finance PhD Workshop

Abstract: Political constraints matter for policymakers' response to climate change and asset prices. Policymakers aim to enact their preferred policies to minimize carbon emissions or maximize output subject to political constraints. When governments and voters disagree over the optimal policy, policymakers endogenously choose opaque policies. By making the learning problem harder for voters, governments can delay or avoid electoral discipline. Greater policy opacity concurrently increases investor uncertainty over future cash flows. These dynamics have tangible effects on asset markets. Option-derived proxies for policy uncertainty and stock price volatility are differentially elevated after environmental policy announcements by governments with preferences different from that of a majority of their voters.