This study examines whether international tourism affects financial market investments. Using over two decades of data for more than 30 countries, we find that recreational travel between countries is associated with higher levels of foreign equity investments and reduced home bias. This evidence of tourism-induced foreign investment is consistent with the familiarity hypothesis and is unlikely to reflect superior information. We alleviate potential endogeneity concerns using several econometric techniques, including instrumental variables, quasi-natural experiments, and multiple placebo tests. Collectively, these results suggest that tourism has positive externalities in financial markets.

We show that hedge fund managers who more actively and astutely adjust the political sensitivity of their portfolios, in line with the dynamic U.S. political landscape, improve their investment performance. Funds that tilt their portfolios toward market segments expected to perform better during the new political regime, specifically around U.S. Presidential elections, generate significantly higher alphas. Further, hedge fund families with greater responsiveness to political changes exhibit persistently superior performance and are more likely to survive. Hedge fund investors reward more responsive fund managers with greater inflows.