Citation

Discussion Paper Details

Please find the details for DP12984 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Trust and Delegated Investing: A Money Doctors Experiment

Author(s): Maximilian Germann, Benjamin Loos and Martin Weber

Publication Date: June 2018

Keyword(s): Investment Decision, Money Doctor, risk aversion and Trust

Programme Area(s): Financial Economics

Abstract: A recent theory by Gennaioli, Shleifer, and Vishny (2015) proposes that trust is an important component for delegated investing. This paper tests the theory in a laboratory experiment. Participants first play a trust game. Participants then act as investors who have to make two separate, delegated investment decisions. Using the amount returned in the trust game as measure of trustworthiness, we show that investors are willing to take substantially more risk when a money manager is more trustworthy, even if this manager charges higher costs. The willingness to take more risk and pay higher costs is increasing in the difference in trustworthiness of the two money managers. This finding is robust to different specifications of the difference in trustworthiness.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12984

Bibliographic Reference

Germann, M, Loos, B and Weber, M. 2018. 'Trust and Delegated Investing: A Money Doctors Experiment'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12984