ICOs with smiling members raise up to 95% more money
A professor of finance at Finland's Hanken School of Economics recently published a pre-published study showing that initial coin offerings (ICOs) make more money when they appear to have more “honest” faces.
Professor Sin Toi Mai, author of the paper titled “The Value of Smiles,” claims that CEOs with high-ranking members' images of trust earned up to 95% more investment than those with low-ranking members.
“The results show a positive relationship between trust and investment on the face of it, with an average raised capital difference of $2.91 million (95%) between the top and bottom quintiles of trusted ICOs. Notably, this perceived trust is not related to post-ICO performance.”
The professor collected a sample of 5,826 ICOs from “various sources” with a total of around $24 billion raised. Face photo images from each ICO's investor packets were evaluated for “trustworthiness” using indicators from previous empirical research.
ICOs that score high on the credibility scale typically raise the most funds, but initial investor interest is reflected after the ICO.
“Furthermore, face loyalty is negatively correlated with post-ICO,” Mai writes, “cumulative returns in the three months after tokens are listed on exchanges.”
This indicates that investors who are attracted to the most reliable faces may overestimate the values of ICOs, and as a result, they tend to sell quickly in the hope of recovering losses or unearned profits due to overinvestment.
Related: Arthur Hayes Says Better ‘Points' Than ICO, Gives Farm To Crypto Adoption
The study found that when little information is available, face credibility plays an important role in the attractiveness of the ICO, which corresponds to little code information on GitHub or more complex white papers.
This means that investors with less technical knowledge are more likely to look for other indicators that have meaning, such as a confident smile on a picture.
After all, there's no science to support the idea that people who smile are more trustworthy, even though studies show that people often believe they are.
