In Military We Trust: The Effect of Managers' Military Background on Mutual Fund Flows

61 Pages Posted: 19 Dec 2018 Last revised: 20 Feb 2020

See all articles by Alexander Cochardt

Alexander Cochardt

University of St. Gallen - School of Finance

Stephan Heller

University of St. Gallen - School of Finance

Vitaly Orlov

University of St. Gallen - School of Finance

Date Written: 2020

Abstract

This paper shows that trust-building characteristics of fund managers affect purchase decisions of mutual fund investors. We exploit variation in fund managers’ prior affiliations with the well-trusted U.S. military institution and relate it to fund flows. Results show that funds with ex-military managers receive significantly higher flows and grow by 6.5% p.a. faster relative to other funds. Investor inclination toward military managers strengthens with managers' military involvement and its salience, and nationwide confidence in the military. Military managers’ superiority in competition for investor funds is not due to variation in fund or managerial attributes and robust to several alternative explanations.

Keywords: Trust, Mutual Funds, Investment Decision, Fund Managers, Military

JEL Classification: G11, G23

Suggested Citation

Cochardt, Alexander and Heller, Stephan and Orlov, Vitaly, In Military We Trust: The Effect of Managers' Military Background on Mutual Fund Flows (2020). Available at SSRN: https://ssrn.com/abstract=3303755 or http://dx.doi.org/10.2139/ssrn.3303755

Alexander Cochardt (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Stephan Heller

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Vitaly Orlov

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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