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The effect of personal portfolio reporting on private investors

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  • Ralf Gerhardt

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  • Steffen Meyer

    ()

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    Abstract

    Information search is costly for private households, especially in relation to their wealth. This paper investigates how retail customers react to free portfolio reporting—and thus reduced search costs—in a unique experimental setting. A large German direct bank sends portfolio reports to 10,000 customers while maintaining a control group of equal size and structure that receives no reports. Analyzing demographics as well as detailed portfolio and trade data, we find that gender, wealth, trade frequency, risk tolerance, and diversification drive the interest in portfolio information. Reading a portfolio report also triggers trading actions; thus, investors seem to appreciate the reduced information costs and act on the information. In addition to contributing to the financial literature on households’ information acquisition, this study derives valuable implications for financial institutions regarding communications and services for their customers. Copyright Swiss Society for Financial Market Research 2013

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    Bibliographic Info

    Article provided by Springer in its journal Financial Markets and Portfolio Management.

    Volume (Year): 27 (2013)
    Issue (Month): 3 (September)
    Pages: 257-273

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    Handle: RePEc:kap:fmktpm:v:27:y:2013:i:3:p:257-273

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    Web page: http://www.springerlink.com/link.asp?id=119763

    Related research

    Keywords: Portfolio reporting; Financial information; Household portfolios; Investment behavior; D14; G21;

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    1. Julie Agnew & Pierluigi Balduzzi & Annika Sundén, 2003. "Portfolio Choice and Trading in a Large 401(k) Plan," American Economic Review, American Economic Association, vol. 93(1), pages 193-215, March.
    2. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, 08.
    3. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
    4. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    5. Todd Mitton & Keith Vorkink, 2007. "Equilibrium Underdiversification and the Preference for Skewness," Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1255-1288.
    6. Donkers, Bas & van Soest, Arthur, 1999. "Subjective measures of household preferences and financial decisions," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 613-642, December.
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