Birds of a Feather: The Impact of Homophily on the Propensity to Follow Financial Advice
Review of Financial Studies, Forthcoming
52 Pages Posted: 16 Mar 2017 Last revised: 16 Jun 2018
Date Written: June 8, 2018
Homophily — individuals’ afﬁnity for others like them — is a powerful principle which governs whose opinions they attend to. Using nearly 2,400 advisory meetings, we ﬁnd that homophily has a significant positive impact on the likelihood of following ﬁnancial advice. The increased likelihood of following stems from homophily on gender and age for male clients and from sameness on marital and parental status for female advisees. Moreover, the homophily effect is mitigated by reduced information asymmetry between client and advisor and a long term relationship with the bank. Our results suggest that client-advisor matching increases individuals’ propensity to follow ﬁnancial advice.
Keywords: Financial Advice, Individual investors, Homophily, Gender differences in financial decision making
JEL Classification: A14, D10, D12, D14
Suggested Citation: Suggested Citation