Dr. Young Jae Choi, Assistant Professor in the Department of Economics & Finance, presented paper at the 2025 Financial Management Association (FMA) Annual Meeting
Research Highlight: Dr. Young Jae Choi, Assistant Professor in the Department of Economics & Finance, presented paper “Friends Buy, Foes Sell: Partisan Ingroup-Outgroup Bias in Investment Decisions” at the 2025 Financial Management Association (FMA) Annual Meeting, and as part of the Korus Lectureship Series in Fall 2025 at the Nistler College.
Article Title: Friends Buy, Foes Sell: Partisan Ingroup-Outgroup Bias in Investment Decisions
Author: Dr. Young Jae Choi
Abstract:
This study experimentally examines how ingroup and outgroup biases shape investment decisions at both the peer and firm level. At the peer level, investors tend to follow politically aligned counterparts, but when interacting with politically opposed peers, we find the opposite: a negative peer effect, where investors act against those peers’ recommendations. At the firm level, both ingroup favoritism and outgroup opposition intensify when company ideology is salient. These results suggest that peer ideology and recommendations may serve as indirect signals of company ideology, which more directly reflects the values investors associate with their holdings. Moreover, we find that partisan investment patterns persist even when firm fundamentals are presented, indicating that such behavior cannot be fully explained by rational, information-based updating and instead reflects non-financial, utility-based preferences.
