We show that name-induced stereotypes affect the investment choices of U.S. mutual fund investors. Managers with foreign-sounding names have about 10% lower annual fund flows, and this effect is stronger among funds with investor clienteles more likely to be suspicious of foreigners. Foreign-named managers experience lower appreciation (greater decline) in flows following good (bad) performance. Following 9/11, flows to funds with managers with Middle-Eastern-sounding names declined abnormally. In an experimental setting in which skill differences are absent, individuals allocate 11% less money to an index fund managed by a foreign-named manager. This gap widens following the Boston marathon bombings.
ASJC Scopus subject areas
- Economics and Econometrics