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Trust and delegated investing: a Money Doctors experiment

Author

Listed:
  • Maximilian Germann
  • Lukas Mertes
  • Martin Weber
  • Benjamin Loos

Abstract

The more trust investors place in a money manager, the more confident they are to take risk. 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 in risky assets with high-cost money managers compared to those with low costs when the high-cost 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 risk-aversion channel can be sufficient for trust to influence behavior.

Suggested Citation

  • Maximilian Germann & Lukas Mertes & Martin Weber & Benjamin Loos, 2025. "Trust and delegated investing: a Money Doctors experiment," Review of Finance, European Finance Association, vol. 29(1), pages 75-102.
  • Handle: RePEc:oup:revfin:v:29:y:2025:i:1:p:75-102.
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    File URL: http://hdl.handle.net/10.1093/rof/rfae031
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    More about this item

    Keywords

    Financial Advice; Investment Decisions; Trust;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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