Real Estate Shocks and Financial Advisor Misconduct
75 Pages Posted: 14 Jun 2018 Last revised: 8 Feb 2021
Date Written: January 16, 2021
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
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