Abstract
We show that investors base parts of their investment decisions in delegated portfolio management on their social perception of the manager. Relying on a novel dataset of a European social trading platform, in which portfolio managers describe themselves and their expertise by written text, we show that a positive tone of these descriptions has an inverted u-shaped effect on portfolio inflows. At the same time, we find no significant differences in performance of managers. By testing the underlying mechanism in two experiments conducted in Germany and the US, our results reveal that the use of positive tone influences portfolio inflows because managers are perceived differently on the two global dimensions of social perception, warmth and competence.
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