Publication Type
Journal Article
Version
submittedVersion
Publication Date
2-2022
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.
Keywords
Trust, International Investments, Mutual Funds, Performance
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial and Quantitative Analysis
Volume
57
Issue
1
First Page
240
Last Page
290
ISSN
0022-1090
Identifier
10.1017/S0022109020000848
Publisher
Cambridge University Press
Citation
MASSA, Massimo; WANG, Chengwei; ZHANG, Hong; and ZHANG, Jian.
Investing in low-trust countries: On the role of social trust in the global mutual fund industry. (2022). Journal of Financial and Quantitative Analysis. 57, (1), 240-290.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7048
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