Work

Investing in Low-Trust Countries: On the Role of Social Trust in the Global Mutual Fund Industry

Year: 2020

Type: article

Abstract: We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, “trust in the market” and “trust in managers” play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109020000848

Authors: Massimo Massa, Chengwei Wang, Hong Zhang, Jian Zhang

Institutions: INSEAD, INSEAD, INSEAD, Sungkyunkwan University, Tsinghua University, University of Hong Kong

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3108156014

FWCI: 1.818

Cites: 100

Cited by: 21

Related to: 10