The Impact of Financial Advisors on the Stock Portfolios of Retail Investors
34 Pages Posted: 1 Sep 2012 Last revised: 12 Dec 2014
Date Written: August 29, 2012
This study investigates the impact of financial advisors on portfolio returns, risk, trading, and diversification using a large data set of individual Dutch equity investors, with random assignment to specific advisors. We confirm recent experimental results on the benefits of advisory interventions that control for moral hazard behavior and endogeneity as a result of self-selection. Advice improves risk-adjusted equity returns and reduces risk. In addition, advisors reduce trading activity, as proxied by the frequency of trades. This study is unique in terms of the data set, the focus on individual stocks, and the use of the Hausman-Taylor panel estimation technique.
Keywords: Individual Investor Portfolio Performance, Financial Advice, Hausman-Taylor Model
JEL Classification: G11, D14, G24
Suggested Citation: Suggested Citation