Trading on Advice ( Preliminary Draft )
نویسندگان
چکیده
Retail investment products are ―rarely bought‖ but ―mostly sold‖, typically involving financial advice from an intermediary. Using a unique dataset from a large German bank, we find that customers who report that they rely (more) on their financial advisor have a substantially higher trading volume and, thereby, generate substantially higher revenues for the bank. They also end up purchasing a higher fraction of investment products for which their advisors were incentivized (―promotion products‖). Customers who rely more on advice typically report to have less interest in and knowledge of financial matters, and they are older. Further information from a detailed customer questionnaire supports the predictions of our model that customers are more likely to follow advice when they are less aware of the underlying conflict of interest and less in a position to question the validity of advice. Overall, our analysis suggests that retail investors’ reliance on potentially biased financial advice may be an important—and hitherto much overlooked—determinant of their security trading and investment. University of Frankfurt, Grüneburgplatz 1, 60323 Frankfurt am Main, Germany. University of Frankfurt, Grüneburgplatz 1, 60323 Frankfurt am Main, Germany University of Frankfurt, Grüneburgplatz 1, 60323 Frankfurt am Main, Germany.
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تاریخ انتشار 2010