Investing in Low Trust Countries: Trust in the Global Mutual Fund Industry
نویسندگان
چکیده
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 lowtrust countries. In both cases, trust-related active share delivers superior performance, although the economic magnitude is larger for cross-border investments (around 2% per year). Our results suggest that trust, including both trust in fund managers and trust in the market of investment, acts as an important building block to the development of financial intermediaries and the efficiency of global investment.
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