The Online Channel, Trading Behavior, and Customer Performance in Financial Services: Evidence from China
Posted: 27 Oct 2016 Last revised: 23 Jan 2017
Date Written: October 25, 2016
Although many securities firms are using the Internet to facilitate stock transactions, little is known about whether and how the use of the online channel affects customer performance and, more importantly, how risk preferences moderate the effect on performance. This research investigates online channel usage and customer performance using a unique data set of more than 7000 customer accounts over a 44-month period (2010-2013) at a large Chinese securities firm. The findings reveal that online channel usage is associated with higher performance in customers’ portfolio returns. However, these effects differ across risk preference categories; specifically, risk-averse investors earn higher profits than risk-neutral investors from using the online channel. Further analyses indicate that the higher performance for risk-averse investors can be explained by their higher trading frequency, but lower level of average trading volume per transaction compared to risk-neutral investors. In contrast, risk-seeking investors profit less from online channel usage because of their higher level of both trading frequency and average trading volume per transaction. We discuss the implications for research and practice.
Keywords: online channel, risk preference, emerging market
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