This study considers the implications of corporate political activity and political risk on asset pricing. Firms which operate an affiliated political action committee (PAC) outperform firms that do not. Among firms that operate a PAC we find that those that spend relatively less on politics outperform those that spend more and that political risk is successfully hedged by firms that are relatively more politically active than their peers. The difference in performance is largely (but not entirely) explained by exposure to systematic political risk, and there is a component to political risk that is orthogonal to commonly considered risk factors.