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The Impact of Financial Advice on Trade Performance and Behavioral Biases

Listed author(s):
  • Hoechle, Daniel

    ()

  • Ruenzi, Stefan

    ()

  • Schaub, Nic

    ()

  • Schmid, Markus

    ()

We use a dataset from a large retail bank to examine the impact of financial advice on investors’ stock trading performance and behavioral biases. Our data allow us to classify each individual trade as either advised or independent and to compare them in a trade-bytrade within-person analysis. Thus, our study is not plagued by the endogeneity problems typically faced by studies on financial advice. We document that advisors hurt trading performance. However, they help to reduce some of the behavioral biases retail investors are subject to, but this does not overcompensate the negative performance effects of the bad stock recommendations.

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File URL: http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1419.pdf
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Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1419.

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Length: 44 pages
Date of creation: Dec 2014
Date of revision: Dec 2015
Handle: RePEc:usg:sfwpfi:2014:19
Contact details of provider: Phone: +41 71 243 40 11
Fax: +41 71 243 40 40
Web page: http://www.unisg.ch/de/universitaet/schools/finance

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