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Finance Professor Honored With Smith Breeden Prize

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Executive Summary

Financial literature has thus far ignored the role of trust in explaining stock market participation and portfolio choices, which inspired the professors to develop a model to measure this phenomenon, Sapienza said. Those who lack trust in the market may view stock investments as they would a three-card game played on a street and decide to put their money elsewhere. "Trust is a very strong predictor of whether or not people decide to participate in the stock market and the fraction of their money they decide to put in the market," Sapienza said.

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