Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
971063 | The Journal of Socio-Economics | 2008 | 12 Pages |
Abstract
Trust is an essential ingredient of the investment process because investing is complex, the world contains irreducible uncertainty, and humans are naturally predisposed to cooperate. Traditional financial models inappropriately treat trust as probability or implicitly ignore it. This paper argues that trust has both cognitive and affective attributes that make it an important determinant of perceived investment risk. Specifically, perceived risk varies inversely with trust. This paper also discusses how trust offers a logical and parsimonious explanation for many financial asset pricing anomalies. Trust is the unseen faith underlying investment value.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Robert A. Olsen,