The Academy of Financial Services 35th Annual Meeting

financial risk tolerance, political orientation, political affiliation

The purpose of this paper is to answer the following two questions. First, to what extent is political orientation associated with financial risk tolerance, and second, to what degree is political orientation predictive of changes in financial risk tolerance across periods. Using data from a panel study of likely voters and financial decision makers prior to and after the 2020 U.S. presidential election, it was determined that Republican and Democratic orientation was, to a certain extent, descriptive of cross-sectional risk tolerance during the period of analysis. Prior to the 2020 election, Republicans were found to exhibit greater risk tolerance compared to Democrats. Across periods, the risk tolerance of Republicans declined meaningfully while the risk tolerance of Democrats increased. The results from this study suggest that political orientation is informative for financial risk tolerance in the context of macro events and the biopsychosocial characteristics of a financial decision maker.