Fintech, Investor Sophistication and Financial Portfolio Choices

64 Pages Posted: 31 May 2023

See all articles by Leonardo Gambacorta

Leonardo Gambacorta

Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)

Romina Gambacorta

Bank of Italy

Roxana Mihet

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: April 21, 2023

Abstract

This paper analyses the links between advances in financial technology, investors' sophistication, and their financial portfolios' composition and returns. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed micro data from the Bank of Italy, we test these predictions for Italian households over the period 2004-2020. In general, heterogeneity in portfolio composition and in returns between sophisticated and unsophisticated investors grows with improvements in financial technology. This heterogeneity is reduced only if financial technology is accessible by everyone and if investors have a similar capacity to use it.

Keywords: inequality, inclusion, fintech, innovation, Matthew effect

JEL Classification: G1, G5, G4, D83, L8, O3

Suggested Citation

Gambacorta, Leonardo and Gambacorta, Romina and Mihet, Roxana, Fintech, Investor Sophistication and Financial Portfolio Choices (April 21, 2023). Bank of Italy Occasional Paper No. 763, Available at SSRN: https://ssrn.com/abstract=4464152 or http://dx.doi.org/10.2139/ssrn.4464152

Leonardo Gambacorta

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Romina Gambacorta (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

Roxana Mihet

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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