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Financial Advice and Portfolio Diversification

Author

Listed:
  • Augustine C. Arize
  • Tao Guo
  • John Malindretos
  • Lawrence Verzani
  • Ikechukwu Ndu

Abstract

This paper examines whether households diversify their investment portfolios and whether portfolio diversification could be affected by where investors seek advice. We found that respondents find advice from banks, insurance companies, and brokerage houses less helpful compared to reading investment research and financial periodicals when making their portfolio decisions. Comparing among the advice from all type of financial institution or financial professionals, it is found that advice from brokerage houses is still the most helpful. But when looking at their actual portfolio diversification, those who rely on brokers’ advice ended up with a less diversified portfolio. These findings support our hypothesis that investors’ portfolio could be negatively influenced because of the services they received from brokerage houses.Â

Suggested Citation

  • Augustine C. Arize & Tao Guo & John Malindretos & Lawrence Verzani & Ikechukwu Ndu, 2019. "Financial Advice and Portfolio Diversification," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 178-178, November.
    • Handle: RePEc:jfr:afr111:v:8:y:2019:i:4:p:178
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    References listed on IDEAS

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    4. Luigi Guiso & Tullio Jappelli, 2008. "Financial Literacy and Portfolio Diversification," EIEF Working Papers Series 0812, Einaudi Institute for Economics and Finance (EIEF), revised Oct 2008.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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