Maximilian Germann, Lukas Mertes, Martin Weber, Benjamin Loos
{"title":"Trust and Delegated Investing: A Money Doctors Experiment","authors":"Maximilian Germann, Lukas Mertes, Martin Weber, Benjamin Loos","doi":"10.1093/rof/rfae031","DOIUrl":null,"url":null,"abstract":"The more trust investors place in a money manager, the more confident they are to take risk (Gennaioli, Shleifer, and Vishny 2015). We test this theory in a laboratory experiment using the amount returned from a trust game as measure of trustworthiness. Investors increase the share invested risky with high-cost money managers compared to those with low costs when the highcost money managers are more trustworthy than the low-cost ones. The willingness to take more risk with high-cost money managers is increasing in the difference in trustworthiness. Up to a third of the difference in trustworthiness translates into an increasing risky share. Vice versa, investors are willing to accept higher costs for investments made through more trustworthy money managers. Our findings are robust to alternative explanations, demonstrating that the riskaversion channel can be sufficient for trust to influence behavior.","PeriodicalId":48036,"journal":{"name":"Review of Finance","volume":null,"pages":null},"PeriodicalIF":5.6000,"publicationDate":"2024-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1093/rof/rfae031","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
The more trust investors place in a money manager, the more confident they are to take risk (Gennaioli, Shleifer, and Vishny 2015). We test this theory in a laboratory experiment using the amount returned from a trust game as measure of trustworthiness. Investors increase the share invested risky with high-cost money managers compared to those with low costs when the highcost money managers are more trustworthy than the low-cost ones. The willingness to take more risk with high-cost money managers is increasing in the difference in trustworthiness. Up to a third of the difference in trustworthiness translates into an increasing risky share. Vice versa, investors are willing to accept higher costs for investments made through more trustworthy money managers. Our findings are robust to alternative explanations, demonstrating that the riskaversion channel can be sufficient for trust to influence behavior.
期刊介绍:
The Review of Finance, the official journal of the European Finance Association, aims at a wide circulation and visibility in the finance profession. The journal publishes high-quality papers in all areas of financial economics, both established and newly developing fields: • •Asset pricing •Corporate finance •Banking and market microstructure •Law and finance •Behavioral finance •Experimental finance Review of Finance occasionally publishes special issues on timely topics, including selected papers presented at the meetings of the European Finance Association or at other selected conferences in the field.