The Impact of Financial Advisors on the Stock Portfolios of Retail Investors

34 Pages Posted: 1 Sep 2012 Last revised: 12 Dec 2014

See all articles by Marc Kramer

Marc Kramer

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

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group

Date Written: August 29, 2012

Abstract

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

Kramer, Marc and Lensink, Robert, The Impact of Financial Advisors on the Stock Portfolios of Retail Investors (August 29, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2139491 or http://dx.doi.org/10.2139/ssrn.2139491

Marc Kramer (Contact Author)

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

Postbus 72
9700 AB Groningen
Netherlands

Robert Lensink

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

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
197
Abstract Views
846
rank
58,505
PlumX Metrics