The Impact of Financial Advice on Trade Performance and Behavioral Biases

Hoechle, Daniel ; Ruenzi, Stefan ; Schaub, Nic ; Schmid, Markus

Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: Working papers on finance / University of St.Gallen, School of Finance Research Paper
Volume: 14-19
Place of publication: St. Gallen
Publication language: English
Institution: Business School > Internat. Finanzierung (Ruenzi)
Subject: 330 Economics
Abstract: We use a proprietary dataset from a large Swiss retail bank to examine the impact of financial advice on individual investors’ stock trading performance and their behavioral biases. Our data allows us to classify each individual trade as either advised or independent and to compare advised and independent trades in a trade-by-trade within-person analysis. Thus, our study is not plagued by the selection and endogeneity problems typically faced by existing studies on the impact of financial advice and individual investors’ performance. We document that advisors hurt stock trading performance. However, there is some evidence that they help to improve portfolio diversification and reduce the local bias as well as the disposition effect.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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