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Abstract

I propose a novel measure of clientele political ideology at the firm level using data from social media. Under Democratic presidencies, firms with the most liberal clientele exhibit excess stock returns that are 19.2 percentage points per year higher than under Republican presidencies. This partisan gap decreases monotonically with clientele conservatism, reaching 3.6 percentage points per year for firms with the most conservative clientele. These differences in returns around the presidential-partisan cycle do not seem to be attributable to differences in risk exposure or in volatility. The analysis around close presidential elections shows the portfolio of firms with clienteles whose beliefs are aligned more closely with those of the winning party begins to exhibit relatively higher abnormal returns in the days after the election.

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