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Financial Advisors: A Case of Babysitters?

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Author Info
Andreas Hackethal () (Goethe University Frankfurt)
Michael Haliassos () (Goethe University Frankfurt)
Tullio Jappelli () (University of Naples Federico II)

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Abstract

This paper provides a joint analysis of household stockholding participation, stock location among stockholding modes, and participation spillovers, using data from the US Survey of Consumer Finances. Our multivariate choice model matches observed participation rates, conditional and unconditional, and asset location patterns. Financial education and sophistication strongly affect direct stockholding and mutual fund participation, while social interactions affect stockholding through retirement accounts only. Household characteristics influence stockholding through retirement accounts conditional on owning retirement accounts, unlike what happens with stockholding through mutual funds. Although stockholding is more common among retirement account owners, this fact is mainly due to their characteristics that led them to buy retirement accounts in the first place rather than to any informational advantages gained through retirement account ownership itself. Finally, our results suggest that, taking stockholding as given, stock location is not arbitrary but crucially depends on investor characteristics.

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Publisher Info
Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2009/04.

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Length: 43 pages
Date of creation: 03 2009
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Handle: RePEc:cfs:cfswop:wp200904

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Related research
Keywords: Financial Advice; Portfolio Choice; Household Finance;

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Find related papers by JEL classification:
G1 - Financial Economics - - General Financial Markets
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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  2. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October. [Downloadable!] (restricted)
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  4. Shapira, Zur & Venezia, Itzhak, 2001. "Patterns of behavior of professionally managed and independent investors," Journal of Banking & Finance, Elsevier, vol. 25(8), pages 1573-1587, August. [Downloadable!] (restricted)
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  6. John Y. Campbell, 2006. "Household Finance," NBER Working Papers 12149, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, 04. [Downloadable!] (restricted)
  8. Daniel Dorn & Gur Huberman, 2005. "Talk and Action: What Individual Investors Say and What They Do," Review of Finance, Oxford University Press for European Finance Association, vol. 9(4), pages 437-481. [Downloadable!] (restricted)
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  9. Lei Feng & Mark S. Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Oxford University Press for European Finance Association, vol. 9(3), pages 305-351. [Downloadable!] (restricted)
  10. Womack, Kent L, 1996. " Do Brokerage Analysts' Recommendations Have Investment Value?," Journal of Finance, American Finance Association, vol. 51(1), pages 137-67, March. [Downloadable!] (restricted)
  11. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January. [Downloadable!] (restricted)
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  12. William N. Goetzmann & Alok Kumar, 2008. "Equity Portfolio Diversification," Review of Finance, Oxford University Press for European Finance Association, vol. 12(3), pages 433-463. [Downloadable!] (restricted)
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  13. Terrance Odean, 1999. "Do Investors Trade Too Much?," American Economic Review, American Economic Association, vol. 89(5), pages 1279-1298, December. [Downloadable!] (restricted)
  14. Barber, Brad M. & Loeffler, Douglas, 1993. "The ?Dartboard? Column: Second-Hand Information and Price Pressure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(02), pages 273-284, June. [Downloadable!]
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