Using a new experimental design, we compare how subjects form beliefs in an investorclient setup under varying degrees of liability. Our results re ect the importance of social preferences when making investment decisions for others. We show that when investors have no liability, those with stronger social preferences are more optimistic about the probability that their investment results in a gain. In other words, we nd that social preferences appear to be correlated with motivated beliefs. This nding suggests the existence of cognitive biases in nancial decision-making and supports the recent literature on the formation of motivated beliefs under limited liability (Barberis, 2015; B enabou and Tirole, 2016).
