Financial Advice and Stock Market Participation

49 Pages Posted: 2 Jun 2014

See all articles by Dimitris Georgarakos

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Roman Inderst

Goethe University Frankfurt

Multiple version iconThere are 3 versions of this paper

Date Written: April 2014

Abstract

We introduce professional financial advice in households’ choice to hold risky financial assets. Consistent with the predictions from a formal model, we present evidence that households’ trust in financial advice only matters when their perceived own financial capability is low. Instead, for households with higher financial capability, only the perception of legal protection in financial markets matters for stock market participation. Our empirical analysis highlights economically significant differences in households’ perception of their rights as consumers of financial services, even when their objective circumstances should not be much different.

Keywords: Consumer Protection, Financial Advice, Household Finance, Trust

JEL Classification: D8, E1, G2

Suggested Citation

Georgarakos, Dimitris and Inderst, Roman, Financial Advice and Stock Market Participation (April 2014). CEPR Discussion Paper No. DP9922. Available at SSRN: https://ssrn.com/abstract=2444945

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Roman Inderst

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60629
Germany
+49 (69) 798-34601 (Phone)
+49 (69) 798-35000 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/en/departments/finance/lehrstuhl/prof-dr-roman-inderst/team

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