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Investment competence and advice seeking


Bachmann, Kremena; Hens, Thorsten (2015). Investment competence and advice seeking. Journal of Behavioral and Experimental Finance, 6:27-41.

Abstract

This study evaluates individuals’ abilities to avoid investment mistakes driven by behavioral biases and analyzes the relationship between investment competence and the propensity to seek or rely on professional advice. We use novel survey data collected from a representative sample of Swiss households. We find that – even after controlling for socio-economic and demographic characteristics – investment competence is positively related to demand for financial advice. It appears that investors who are at the highest risk of making investment mistakes are those who are the least likely to seek help from professional advisors. Therefore, supply-side solutions imposed by regulators to protect financial customers may not benefit those who need them most.

Abstract

This study evaluates individuals’ abilities to avoid investment mistakes driven by behavioral biases and analyzes the relationship between investment competence and the propensity to seek or rely on professional advice. We use novel survey data collected from a representative sample of Swiss households. We find that – even after controlling for socio-economic and demographic characteristics – investment competence is positively related to demand for financial advice. It appears that investors who are at the highest risk of making investment mistakes are those who are the least likely to seek help from professional advisors. Therefore, supply-side solutions imposed by regulators to protect financial customers may not benefit those who need them most.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Financial literacy; Behavioral biases; Demand for financial advice; Household finance
Language:English
Date:2015
Deposited On:18 Jan 2016 12:47
Last Modified:29 Jan 2017 08:13
Publisher:Elsevier
ISSN:2214-6350
Additional Information:Working Paper ist abrufbar auf: http://www.zora.uzh.ch/81328/
Publisher DOI:https://doi.org/10.1016/j.jbef.2015.03.001
Related URLs:http://www.sciencedirect.com/science/article/pii/S2214635015000106 (Publisher)
http://www.zora.uzh.ch/81328/
Other Identification Number:merlin-id:12038

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