Foreign portfolio investments and voting bias in the Eurovision Song Contest

We investigate the role played by the voting bias in the Eurovision Song Contest (ESC) in explaining international bilateral portfolio investments. Our analysis reveals that the voting bias in the ESC score significantly helps explain bilateral portfolio investments but only for non-professional investors, while no systematic effect is found for financial companies' holdings. Our results undergo robustness checks related to changes in the voting system and to the inclusion of standard static indicators of cultural distance. Moreover, for non-professional investors, the effect of voting bias is larger for debt than for equities: it is consistent with an affinity/animosity bias directed to target foreign governments and then reflected in sovereign debt holdings. Our analysis highlights that financial decision making, especially for less sophisticated investors, may be driven not only by static economic and cultural proximity, but also by less predictable time-varying national subjective feelings.