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Financial advice: Who Exactly Follows It?

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  • Reiter-Gavish, Liron
  • Qadan, Mahmoud
  • Yagil, Joseph

Abstract

Using data from about 290,000 household investment accounts, we provide a comprehensive analysis of the role of personal economic and demographic characteristics in determining the tendency to utilize financial advice. Our findings indicate that investors' sophistication level, captured using several proxies, is negatively correlated with the decision to follow the financial advice received. In addition, we find that individual differences such as age, gender and family status are strongly associated with the tendency to use the advice. The findings are robust under different distributions of the data. Finally, we also test how macroeconomic uncertainty affects the tendency to utilize financial advice. Our results demonstrate that higher levels of financial uncertainty are associated with less use of financial advice.

Suggested Citation

  • Reiter-Gavish, Liron & Qadan, Mahmoud & Yagil, Joseph, 2021. "Financial advice: Who Exactly Follows It?," Research in Economics, Elsevier, vol. 75(3), pages 244-258.
    • Handle: RePEc:eee:reecon:v:75:y:2021:i:3:p:244-258
    DOI: 10.1016/j.rie.2021.06.003
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    More about this item

    Keywords

    Investor sophistication; Financial advice; Investor literacy; Household finance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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