Did reform of prudent trust investment lawschange trust portfolio allocation?
By: Max M. Schanzenbach & Robert H. Sitkoff
Contributors: Sitkoff, Robert H.; John M. Olin Center for Law, Economics, and Business
Series: Discussion paper -- no. 580; Discussion paper (John M. Olin Center for Law, Economics, and Business : Online) -- no. 580.
Publisher: Harvard Law School
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "This paper investigates the effect of changes in state prudent trust investment laws on asset allocation in noncommercial trusts.  The old prudent man rule favored "safe" invest-ments and disfavored "speculation" in stock.  The new prudent investor rule directs trustees to craft an investment portfolio that fits the risk tolerance of the beneficiaries and the purpose of the trust.  Using state- and institution-level panel data from 1986 through 1997, we find that after adoption of the new prudent investor rule, institutional trustees held about 1.5 to 4.5 per-centage points more stock at the expense of "safe" investments.  Our findings explain roughly 15 to 30 percent of the overall increase in stock holdings in the period studied.  We attribute most of the remaining increase to stock market appreciation.  We conclude that, even though trust fiduciary laws are nominally default rules, institutional trustees are nonetheless sensitive to changes in those rules.  (US, Canada)"--John M. Olin Center for Law, Economics, and Business web site.
Notes: Title from PDF file as viewed on 6/28/2007.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.