Fintech, Investor Sophistication and Financial Portfolio Choices
64 Pages Posted: 31 May 2023
Date Written: April 21, 2023
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
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