We study the impact of political disagreement on investor disagreement. Using continuous, time-varying measures of ideological leanings of U.S. state legislators on the liberal-conservative scale, we show that greater political polarization in a state leads to greater dispersion in earnings forecasts of analysts located in that state. This effect is stronger for firms in politically sensitive industries and firms that commit significant resources to social issues. We document the importance of our finding for both asset pricing and corporate investments. Looking at the cross-section of returns, we show that stocks covered by more politically polarized analysts earn lower future returns. This finding is consistent with Miller’s (1977) idea that in the presence of belief heterogeneity and short-sale constraints, prices reflect more optimistic valuations. In an M&A setting, we show that acquirers covered by more polarized analysts earn significantly lower announcement returns for equity offers but not for all-cash offers. These findings are consistent with models in which greater investor disagreement leads to steeper demand curves for stocks.