Abstract

http://ssrn.com/abstract=1659189
 
 

References (74)



 
 

Citations (1)



 


 



Trust and Investment Management: The Effects of Manager Trustworthiness on Hedge Fund Investments


Ankur Pareek


Rutgers University

Roy Zuckerman


Rutgers Business School

July 9, 2013

AFA 2012 Chicago Meetings Paper

Abstract:     
This paper studies the effect of trust or perceived manager trustworthiness on hedge fund investment. Controlling for past-performance, we find that hedge fund managers whose photographs are rated as more trustworthy are able to attract greater fund flows, in the medium performance range, and have a less convex flow-performance relationship compared to the managers with lower trustworthiness. In addition, we find that, conditional on poor past-performance, more "trustworthy" managers are also more likely to survive. We find no evidence that perceived trustworthiness predicts actual manager skill. In fact, managers who are perceived as more trustworthy perform worse and generate lower risk-adjusted returns when compared to those who are perceived as less trustworthy. We attribute this phenomenon to over-investment with "trustworthy" managers caused by an investor bias. Our study joins the growing literature discussing the role of trust in economic outcomes, and suggests that trust could play a major role in investment decisions, even for sophisticated investor sets.

Number of Pages in PDF File: 36

Keywords: Hedge Funds, Trust

JEL Classification: G19, G23

Accepted Paper Series


Download This Paper

Date posted: August 16, 2010 ; Last revised: July 9, 2013

Suggested Citation

Pareek, Ankur and Zuckerman, Roy, Trust and Investment Management: The Effects of Manager Trustworthiness on Hedge Fund Investments (July 9, 2013). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1659189

Contact Information

Ankur Pareek
Rutgers University ( email )
1 Washington Park
Newark, NJ 07102
United States
973-353-1646 (Phone)
Roy Zuckerman (Contact Author)
Rutgers Business School ( email )
1 Washington Park
Newark, NJ 07102
United States
9733531536 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 1,400
Downloads: 156
Download Rank: 111,257
References:  74
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.328 seconds