Portfolio choice and financial advice

Alexis Direr and Michael Visser

Finance, 2013, vol. 34, issue 2, 35-64

Abstract: This paper analyzes portfolio allocation decisions of individual investors. Our dataset records how individuals allocate their money among risky funds and a money-market fund, and also the characteristics of both the investors and the financial advisors who sell the products. These data offer a unique opportunity to investigate how portfolio decisions are affected by financial advisors. Our empirical strategy consists in studying the relationship between the share of the total capital invested in risky funds and the characteristics of buyers and sellers. Since the dependent variable is bounded between zero and one, we estimate a fractional response model. We find that the share invested in risky funds is larger when the advisor is more educated. Furthermore, male advisors sell larger shares of risky funds than female advisors. We offer possible explanations for these findings

Date: 2013
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