Information Acquisition and Financial Advice

Gülen Karakoç, Marco Pagnozzi, Salvatore Piccolo () and Giovanni W. Puopolo ()
Additional contact information
Giovanni W. Puopolo: Università di Napoli Federico II and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: This paper studies the interplay between the investor’s incentives to delegate her asset allocation choice to a biased financial advisor, and the advisor’s decision to acquire information about multiple characteristics of the risky asset. We show that, to prevent unprofitable investments, the investor may delegate to the advisor imposing a cap on the amount of wealth that the advisor can invest. This cap (i) is decreasing in the magnitude of the conflict of interests between the investor and the advisor and (ii) may be lower when the advisor possesses more information. Interestingly, although the investor always prefers a more-informed advisor, the advisor may choose not to acquire full information, and reducing the conflict of interests with the investor may actually induce the advisor to acquire less information.

Keywords: Financial Advice; Asset-Allocation; Delegation; Information Acquisition. (search for similar items in EconPapers)
JEL-codes: D40 D82 D83 G11 G21 G51 (search for similar items in EconPapers)
Date: 2020-11-04
New Economics Papers: this item is included in nep-cfn and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.csef.it/WP/wp587.pdf (application/pdf)

Related works:
Journal Article: Information acquisition and financial advice (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:587

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().