When financial advice rocks the market

Conrado Cuevas and Dan Bernhardt

Emerging Markets Review, 2023, vol. 56, issue C

Abstract: We document the impact of recommendations by a hugely influential Chilean pension advisor, H&L, on pension investments by individuals, domestic stock market outcomes, and pension fund manager investment strategies. Following H&L's retirement portfolio recommendations, pension investors shifted amounts that, in a week, often exceeded 100% of monthly domestic stock trading volume. The market believed the recommendations—domestic stock prices responded, but they did so without trade: the massive portfolio shifts did not generate abnormally-high trading volume. To accommodate H&L's impact, pension managers adjusted portfolio compositions, making them more similar, and shifted holdings of liquid assets rather than domestic stocks.

Keywords: Financial advice; Announcement effect; Public information; Trading volume; Institutional investors; Liquidity management (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:56:y:2023:i:c:s1566014123000560

DOI: 10.1016/j.ememar.2023.101051

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