Real Estate Shocks and Financial Advisor Misconduct

75 Pages Posted: 14 Jun 2018 Last revised: 8 Feb 2021

See all articles by Stephen G. Dimmock

Stephen G. Dimmock

National University of Singapore; Asian Bureau of Finance and Economic Research (ABFER)

William Christopher Gerken

University of Kentucky - Finance

Tyson D. Van Alfen

Southern Illinois University

Date Written: January 16, 2021

Abstract

We test whether personal real estate shocks affect professional misconduct by financial advisors. We use a panel of advisors' home addresses and examine within-advisor variation relative to other advisors who work at the same firm and live in the same ZIP code. We find a negative relation between housing returns and misconduct. We show that advisors' housing returns explain misconduct against out-of-state customers, breaking the link between customer and advisor housing shocks. Further, the results are stronger for advisors with lower career risk from committing misconduct, and for advisors with greater borrowing constraints.

Keywords: Financial Advisors, Brokers, Financial Misconduct, Fraud, Household Finance, Real Estate

JEL Classification: G20, G24, G28, K22, R31, D14, D18

Suggested Citation

Dimmock, Stephen G. and Gerken, William Christopher and Van Alfen, Tyson D., Real Estate Shocks and Financial Advisor Misconduct (January 16, 2021). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3187082 or http://dx.doi.org/10.2139/ssrn.3187082

Stephen G. Dimmock (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
BIZ 1 #7-63
Singapore, 119245
Singapore

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
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

Southern Illinois University ( email )

College of Business
Carbondale, IL 62901
United States

HOME PAGE: http://www.vanalfen.io

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