Financial Advice and Individual Investor Portfolio Performance

Financial Management, 2012

55 Pages Posted: 11 Dec 2011 Last revised: 26 Apr 2012

See all articles by Marc Kramer

Marc Kramer

University of Groningen - Faculty of Economics and Business - Department of Economics, Econometrics & Finance

Date Written: December 9, 2011

Abstract

This paper investigates whether financial advisers add value to individual investors’ portfolio decisions by comparing portfolios of advised and self-directed (execution-only) Dutch individual investors. The results indicate significant differences in characteristics and portfolios between these investor groups, but no evidence of differences in risk-adjusted performance. The findings indicate that portfolios of advised investors are better diversified and carry significantly less idiosyncratic risk. In addition, evidence from an analysis of investors who switch to advice taking indicates that these findings (at least in part) reflect the effect of advisory intervention.

Keywords: Financial Advice, Individual Investor Portfolio Performance, Household Finance

JEL Classification: G11, D14, G24

Suggested Citation

Kramer, Marc, Financial Advice and Individual Investor Portfolio Performance (December 9, 2011). Financial Management, 2012, Available at SSRN: https://ssrn.com/abstract=1970250

Marc Kramer (Contact Author)

University of Groningen - Faculty of Economics and Business - Department of Economics, Econometrics & Finance ( email )

Postbus 72
9700 AB Groningen
Netherlands

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