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Come together: trust, sociability and individual investors' stock-portfolio returns

Author

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  • Oscar Stålnacke

Abstract

Purpose - Previous studies have found that trusting and sociable individuals are more likely to participate in the stock market and hold risky assets. The purpose of this paper is to explore if trust and sociability also are related to individual investors' stock-portfolio returns. Design/methodology/approach - The authors study the questions in the paper by linking survey measures of trust and sociability to investors' actual stock portfolios. Findings - The authors find that trusting investors acquire higher raw and risk-adjusted stock-portfolio returns, but that the returns do not differ depending on how sociable investors are. These results suggest that trust is important for investors' stock-portfolio decisions, and that trusting investors tend to perform better in the stock market than less-trusting investors. Originality/value - This is, to the best of the authors’ knowledge, the first paper that relates survey measures of trust and sociability to investors' actual stock-portfolio holdings. This is important to increase the understanding for how trust and sociability are related to the financial decisions individuals makes.

Suggested Citation

  • Oscar Stålnacke, 2020. "Come together: trust, sociability and individual investors' stock-portfolio returns," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 13(5), pages 647-662, July.
    • Handle: RePEc:eme:rbfpps:rbf-11-2019-0160
    DOI: 10.1108/RBF-11-2019-0160
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    More about this item

    Keywords

    Trust; Sociability; Individual investors; Portfolio return; Financial decisions; D14; D83; G11;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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