Don't Answer the Phone - Financial Advice and Individual Investors' Performance

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

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Document Type: Working paper
Year of publication: 2013
Place of publication: St. Gallen
Publishing house: Univ. St. Gallen, Schweizerisches Inst. für Banken und Finanzen
Publication language: English
Institution: Business School > Internat. Finanzierung (Ruenzi)
Subject: 330 Economics
Abstract: We use a proprietary dataset from a large Swiss wholesale bank and examine the impact of fiancial advice on individual investors' trading performance and behavioral biases. Due to the unique structure of our dataset, we can classify each trade as either an advised or an independent trade. This allows us to compare advised and independent trades on a trade-by-trade within-person analysis. Thus, our study is not plagued by the typical selection and endogeneity problem existing studies on the impact of financial advice typically face. We document that advisors hurt trading performance and that this effect is particularly pronounced if the trade follows a client-advisor contact that is initiated by the advisor. There is also only limited evidence that advisors help to reduce behavioral biases, casting serious doubts on the role of financial advisors.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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