Is it Fair? Perceptions of Fair Investment Behavior Across Countries
13 Pages Posted: 5 Aug 2011
Date Written: July 1, 2011
Fairness matters to financial advisors, whether fairness in financial markets or fairness in their relations with clients. Yet perceptions of fairness vary greatly and they are hotly debated everywhere, including politics, education, medicine, law, and finance. I explore fairness in finance in the context of insider trading.
Do perceptions of the fairness of insider trading correspond to the law? Do they vary by knowledge of the law? Are perceptions of fairness universal, or do they vary across countries? Do they vary across groups, such as the groups of university students and finance professionals? Do they depend on the incomes of traders or whether traders have sure or only probabilistic information? Do they depend on whether an intermediary is involved?
I use surveys to uncover the features that underlie perceptions of the fairness of insider trading in the stock and car markets in eight countries: Australia, India, Israel, Italy, the Netherlands, Tunisia, Turkey, and the United States.
Perceptions of the fairness of insider trading in the stock and car markets vary greatly across countries and between professionals and students in each country, and while they are affected by the law they are not subsumed by it. Perceptions of the fairness of insider trading in the stock market, but not the car market, are related to the Corruption Perceptions Index and stock market participation.
Keywords: behavioral finance
JEL Classification: G00, G10
Suggested Citation: Suggested Citation