Trust in money managers increases investors’ appetite for risk.
If you ask critics of today’s US financial sector why it got so big, they might say “greed.” But research by Chicago Booth’s Robert W. Vishny, Universita Bocconi’s Nicola Gennaioli, and Harvard’s Andrei Shleifer suggests a better answer would be “trust.” The researchers postulate that many people, lacking the skills and knowledge to invest on their own, hire money managers they trust, which reduces their anxiety about taking investment risks. That would explain why stock-market participation in the United States has been rising, and the share of riskier assets in financial portfolios has been growing.
As much as we’re awash in data, a huge problem for building predictive models is the information we don’t have.
A Better Way for Finance (and Others) to Handle Missing Data
In the complex real economy, consumer price inflation can be a misleading indicator.
What’s Causing Inflation: Supply or Demand?
Job loss, divorce, and other life events far outweigh negative equity.
What’s Actually behind Most Mortgage DefaultsYour Privacy
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