Investing in Low-Trust Countries: Trust in the Global Mutual Fund Industry

76 Pages Posted: 21 Jan 2015

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Chengwei Wang

SKK GSB

Hong Zhang

Tsinghua University - PBC School of Finance

Jian Zhang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Date Written: January 20, 2015

Abstract

We hypothesize that trust plays an important role in affecting the activeness and effectiveness of the global mutual fund industry. Empirically, trust is positively associated with the activeness of domestic funds, whereas for internationals mutual funds conducting cross-border investments activeness is bounded by the trust of low-trust countries. In both cases, trust-related active share delivers superior performance, whereas the economic magnitude is larger for cross-border investments (around 2% per year). Our results suggest that trust, including both trust in managers and trust in the market, may significantly affect the development of financial intermediaries and the efficiency of global investment.

Keywords: Trust, International Investments, Mutual Funds, Performance

JEL Classification: G15, G20

Suggested Citation

Massa, Massimo and Wang, Chengwei and Zhang, Hong and Zhang, Jian, Investing in Low-Trust Countries: Trust in the Global Mutual Fund Industry (January 20, 2015). Asian Finance Association (AsianFA) 2015 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2552550 or http://dx.doi.org/10.2139/ssrn.2552550

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Chengwei Wang (Contact Author)

SKK GSB ( email )

Sungkyunkwan University
25-2 Sungkyunkwan-ro, Jongro-gu
Seoul, 03063
Korea, Republic of (South Korea)

Hong Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

HOME PAGE: http://eng.pbcsf.tsinghua.edu.cn/content/details167_7995_x.html

Jian Zhang

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

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