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Birds of a Feather: The Impact of Homophily on the Propensity to Follow Financial Advice

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  • Oscar Stolper
  • Andreas Walter

Abstract

Homophily—individuals’ affinity for others like them—is a powerful principle that governs whose opinions people attend to. Using nearly 2,400 advisory meetings, we find that homophily has a significant positive impact on the likelihood of following financial advice. The increased likelihood of following stems from homophily on gender and age for male clients and from sameness on marital and parental status for female advisees. Moreover, the homophily effect is mitigated by reduced information asymmetry between client and advisor and a long-term relationship with the bank. Our results suggest that client-advisor matching increases individuals’ propensity to follow financial advice. Received June 21, 2017; editorial decision June 7, 2018 by Editor Philip Strahan.

Suggested Citation

  • Oscar Stolper & Andreas Walter, 2019. "Birds of a Feather: The Impact of Homophily on the Propensity to Follow Financial Advice," The Review of Financial Studies, Society for Financial Studies, vol. 32(2), pages 524-563.
    • Handle: RePEc:oup:rfinst:v:32:y:2019:i:2:p:524-563.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy082
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    Cited by:

    1. Francesco D’Acunto & Andreas Fuster & Michael Weber, 2021. "Diverse Policy Committees Can Reach Underrepresented Groups," NBER Working Papers 29275, National Bureau of Economic Research, Inc.
    2. Shen, Lingbo, 2022. "Essays on behavioral finance and corporate finance," Other publications TiSEM a9b98a25-a208-4ba6-9344-9, Tilburg University, School of Economics and Management.
    3. de Andres, Pablo & Garcia-Rodriguez, Inigo & Romero-Merino, M. Elena & Santamaria-Mariscal, Marcos, 2022. "Stakeholder governance and private benefits: The case of politicians in Spanish cajas," Journal of Business Research, Elsevier, vol. 144(C), pages 1272-1292.
    4. Rubin, Amir & Rubin, Eran & Segal, Dan, 2023. "Editor home bias?," Research Policy, Elsevier, vol. 52(6).
    5. Li, Jianwen & Zhang, Bo & Jiang, Mingming & Hu, Jinyan, 2023. "Homophilous intensity in the online lending market: Bidding behavior and economic effects," Journal of Banking & Finance, Elsevier, vol. 152(C).
    6. Boyao Wu & Difang Huang & Muzi Chen, 2023. "Estimating contagion mechanism in global equity market with time‐zone effect," Financial Management, Financial Management Association International, vol. 52(3), pages 543-572, September.
    7. Meyer, Steffen & Uhr, Charline & Loos, Benjamin & Hackethal, Andreas, 2023. "Switching from commissions on mutual funds to flat-fees: How are advisory clients affected?," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 423-449.

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