The Effect of Personal Portfolio Reporting on Private Investors
22 Pages Posted: 28 Apr 2009
Date Written: February 14, 2009
Information search is costly for private households especially in relation to their wealth. This paper investigates how retail customers react to free portfolio reporting - and thus reduced search costs - in a unique experimental setting: A large German direct bank sends portfolio reports to 10,000 customers while maintaining a control group of equal size and structure that received no report. Analyzing demographics as well as detailed portfolio and trade data, we find that gender, wealth, trade frequency, risk tolerance, and diversification drive the interest in portfolio information. Reading a portfolio report also triggers trading actions - so investors seem to appreciate the reduced information costs and act on it. Besides contributing to financial literature on households' information acquisition, this study derives valuable implications for financial institutions regarding communications and services for their customers.
Keywords: Portfolio Reporting, Financial Information, Household Portfolios, Investment Behavior
JEL Classification: D14, G21
Suggested Citation: Suggested Citation