Protecting investors from themselves: Evidence from a regulatory intervention

Chris Firth

Journal of Behavioral and Experimental Finance, 2020, vol. 27, issue C

Abstract: Retail investors tend to make poor investment decisions and consequently under-perform. A plausible approach to improving this situation is to restrict the least knowledgeable or experienced investors, a concept implemented for Singapore investors via a Customer Knowledge Assessment (CKA). I study the empirical relationship between retail investors’ investment portfolio outcomes, and their CKA results. Although those satisfying the assessment criteria made fewer mistakes, as benchmarked by a selection of normative models, the CKA only weakly identifies less skilled investors. The high misclassification rate, under an analysis favorable to the scheme, highlights the challenges of investor screening.

Keywords: Singapore CKA; Financial literacy; Regulatory intervention; Investment decisions; Consumer protection; Financial mistakes (search for similar items in EconPapers)
JEL-codes: D12 D14 D18 G11 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:27:y:2020:i:c:s2214635019302576

DOI: 10.1016/j.jbef.2020.100329

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