A new working paper suggests that investors’ political affiliations shape their economic views, with Republican traders being more optimistic about the economy even as COVID-19 injects uncertainty.
Using StockTwits, a social network for investors, researchers identified keywords in users’ messages that could identify their partisan affiliation as Republican. Those included searching for such terms as “Liberal Media” and “Russia Hoax,” phrases that mirror the language of President Donald Trump.
“StockTwits messages reflect genuine investor beliefs at the time of posting. To maintain the reliability of reputations on StockTwits, old messages cannot be deleted,” the authors wrote.
Researchers examined activity on the network during the pandemic, when there was high uncertainty in the economy. Republicans were “significantly” more optimistic about the market during the COVID-19 pandemic than other traders, with partisan affiliation accounting for an estimated 20% of abnormal trading volume since March. In accordance with Trump's rhetoric, partisan Republicans were also more pessimistic toward Chinese companies.
The paper came from the work of Tony Cookson of the Leeds School of Business at University of Colorado-Boulder and researchers at the University of California San Diego.
“The world in the face of COVID-19 forces us to ask different questions about how investors form their opinions,” said Cookson. “It can be overwhelming to make these choices. It’s interesting that we saw politics mattering as much as it does.”