Real Estate Shocks and Financial Advisor Misconduct

41 Pages Posted: 14 Jun 2018

See all articles by Stephen G. Dimmock

Stephen G. Dimmock

Nanyang Technological University - Division of Finance

William Christopher Gerken

University of Kentucky - Finance

Tyson D. Van Alfen

University of Kentucky, Gatton College of Business and Economics, Department of Finance & Quantitative Methods

Date Written: May 29, 2018

Abstract

We test whether household wealth shocks affect professional misconduct by financial advisors. Using a novel panel containing all home addresses belonging to 434,447 advisors, we exploit within-advisor variation and show that advisors increase misconduct following declines in their homes' values. We find similar results in specifications that exploit variation in cumulative house price return, allowing us to limit the comparison to advisors living in the same ZIP code during the same year. We find evidence that the increase in misconduct is due to willful actions by advisors, such as unauthorized or excess trading, as well as neglect or distraction due to financial pressure.

Keywords: Financial advisors, financial misconduct, fraud, real estate, bankruptcy

JEL Classification: G2, G20, G28, K2, K22, R31

Suggested Citation

Dimmock, Stephen G. and Gerken, William Christopher and Van Alfen, Tyson D., Real Estate Shocks and Financial Advisor Misconduct (May 29, 2018). Available at SSRN: https://ssrn.com/abstract=3187082 or http://dx.doi.org/10.2139/ssrn.3187082

Stephen G. Dimmock (Contact Author)

Nanyang Technological University - Division of Finance ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore

William Christopher Gerken

University of Kentucky - Finance ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States

HOME PAGE: http://www.willgerken.com

Tyson D. Van Alfen

University of Kentucky, Gatton College of Business and Economics, Department of Finance & Quantitative Methods ( email )

Lexington, KY 40506
United States

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