Abstract
We examine the effects of social trust on the local bias of individual investors. Using the trading records of Chinese retail investors, we find that investors with higher trust exhibit lower local bias in their stock portfolios, and this pattern holds under various robustness tests. We further show that trust helps accomplish greater portfolio diversification and reduces familiarity-based investment bias in general. These findings suggest that trust plays an important role in individual investors’ financial decisions, especially when they face unfamiliar investment opportunities.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
