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Investment competence and advice seeking


Bachmann, Kremena; Hens, Thorsten (2013). Investment competence and advice seeking. Department of Banking and Finance 4499, University of Zurich.

Abstract

This paper evaluates individuals’ ability to avoid investment mistakes and analyzes how investment competence is related to the propensity to seek or rely on professional advice. To address these issues, we use novel survey data collected from a representative sample of Swiss households. We find that investment competence is characterized by significant age and gender gaps, and that individuals who rely less on price movements as a source of information about investments are more likely to show above-the-average investment competence. We also find that individuals with relatively extensive investment experience and those who rely relatively strongly on their own judgment in making investment decisions are more likely to make investment decisions autonomously. In addition, we find that investment competence is positively related to the demand for financial advice. Thus, it appears that the individuals who most need financial advice are those who are least likely to seek such advice and rely on it.

Abstract

This paper evaluates individuals’ ability to avoid investment mistakes and analyzes how investment competence is related to the propensity to seek or rely on professional advice. To address these issues, we use novel survey data collected from a representative sample of Swiss households. We find that investment competence is characterized by significant age and gender gaps, and that individuals who rely less on price movements as a source of information about investments are more likely to show above-the-average investment competence. We also find that individuals with relatively extensive investment experience and those who rely relatively strongly on their own judgment in making investment decisions are more likely to make investment decisions autonomously. In addition, we find that investment competence is positively related to the demand for financial advice. Thus, it appears that the individuals who most need financial advice are those who are least likely to seek such advice and rely on it.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
JEL Classification:D14, D83, G11, G23
Language:English
Date:2013
Deposited On:25 Sep 2013 05:52
Last Modified:07 Dec 2017 22:39
Series Name:Department of Banking and Finance
Additional Information:Dieses Working Paper ist Journal of Behavioral and Experimental Finance erschienen: http://www.zora.uzh.ch/119586/
Related URLs:http://www.zora.uzh.ch/119586/
Other Identification Number:merlin-id:8085

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