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

Review of Financial Studies, Forthcoming

52 Pages Posted: 16 Mar 2017 Last revised: 16 Jun 2018

See all articles by Oscar Anselm Stolper

Oscar Anselm Stolper

University of Marburg | Behavioral Finance Research Group

Andreas Walter

University of Giessen - Department of Financial Services

Date Written: June 8, 2018

Abstract

Homophily — individuals’ affinity for others like them — is a powerful principle which governs whose opinions they 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.

Keywords: Financial Advice, Individual investors, Homophily, Gender differences in financial decision making

JEL Classification: A14, D10, D12, D14

Suggested Citation

Stolper, Oscar Anselm and Walter, Andreas, Birds of a Feather: The Impact of Homophily on the Propensity to Follow Financial Advice (June 8, 2018). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2932737 or http://dx.doi.org/10.2139/ssrn.2932737

Oscar Anselm Stolper (Contact Author)

University of Marburg | Behavioral Finance Research Group ( email )

Am Plan 1
Marburg, 35032
Germany

HOME PAGE: http://https://www.uni-marburg.de/de/fb02/professuren/bwl/behavioralfinance

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://wiwi.uni-giessen.de/ma/dat/walter/Andreas_Walter/

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