Political Geography, Myside Bias, and Retail Investor Behavior

Abstract

We examine how political geography shapes retail investor behavior through partisan myside bias-a location-specific form of confirmation bias. Using household-level data from the Panel Study of Income Dynamics (PSID) and detailed brokerage records, we find that investors in politically aligned states exhibit greater trust in the market, stronger peer-driven trading, and a higher tendency toward behavioral biases such as local bias, disposition effect, and overconfidence. These effects are most pronounced when political sentiment is strong, highlighting how regional partisanship can distort financial decision-making.

Keywords

Tags of Social Finance