Individual investor perceptions and behavior during the financial crisis

Hoffmann, Arvid O. I.; Post, Thomas; Pennings, J.M.E.

doi:10.1016/j.jbankfin.2012.08.007

Cited by 344 publications

(207 citation statements)

References 62 publications

Supporting

Mentioning

172

Contrasting

Unclassified

Order By: Relevance

“…Yet, a number of contributions in the field find that advised accounts are on average associated with higher costs, lower returns and inferior risk-return tradeoffs (Bergstresser et al 2009;Hackethal et al 2012;Kramer 2012) and conclude that advisors do not add value through their investment recommendations when judged relative to passive investment benchmarks (Foerster et al 2014). Also, while there is some consensus that advice can improve retail investor portfolio decisions if conflicts of interest are mitigated (Bhattacharya et al 2012;Hung and Yoong 2010), a typical advisor's incentive structure does in fact create a conflict of interest, leading advisors to reinforce biases of their clients instead of correcting them (Mullainathan et al 2012) and tilt their recommendations towards costly transactions (Hoechle et al 2015).…”

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

Financial literacy, financial advice, and financial behavior

2017

View full text Add to dashboard Cite

In this survey, we review the voluminous body of literature on the measurement and the determinants of financial literacy. Wherever possible, we supplement existing findings with recent descriptive evidence of German households' financial literacy levels based on the novel Panel on Household Finances dataset, a large-scale survey administered by the Deutsche Bundesbank and representative of the financial situation of households in Germany. Prior research not only documents generally low levels of financial literacy but also finds large heterogeneity in financial literacy across the population, suggesting that economically vulnerable groups are placed at further disadvantage by their lack of financial knowledge. In addition, we assess the literature evaluating financial education as a means to improve financial literacy and financial behavior. Our survey suggests that the evidence with respect to the effectiveness of the programs is rather disappointing. We also review the role of individuals' financial literacy for the use of professional financial advice and assess whether expert intervention can serve as a substitute to financial literacy. We conclude by discussing several directions for future research.

show abstract

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

Financial literacy, financial advice, and financial behavior

2017

View full text Add to dashboard Cite

show abstract

“…The first considers financial risk tolerance to be influenced by not only personal characteristics but also situational factors which induce risk tolerance to change overtime (Rui Yao 2003;Hoffmann, Post, & Pennings 2013). The other defines financial risk tolerance as a relatively stable trait that does not change significantly (Roszkowski & Davey 2010;Van de Venter et al 2012;Gerrans, Faff, & Hartnett 2013).…”

Section: The Risk Tolerance/asset Allocation Decision Frameworkmentioning

confidence: 99%

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Nguyen¹,

Gallery²,

Newton³

2016

AABFJ

View full text Add to dashboard Cite

Client risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decision-making. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. KeywordsRisk tolerance, individual investment decisions, client-adviser relationship, financial advice context, financial planning AbstractClient risk tolerance is universally assessed in the advisory process to help financial advisers provide suitable advice that assists clients in their investment decision-making. Although there is a well-established literature on risk tolerance and decision-making, little is known about financial risk tolerance and its influence on investor decisions in the financial advice context. Thus, the purpose of this study is to examine this influence with a focus on the key expected risk tolerance determinants: client financial literacy, trust in the financial advice service, and relationship length with the service. A new theoretical model and related hypotheses were proposed and tested using survey data from financial adviser clients in Australia (N=538). Results revealed a positive relationship between client risk tolerance and investment decisionmaking. Further, client trust and relationship length with the service were found to be positively associated with client financial literacy and risk tolerance. These findings, which provide a more comprehensive understanding of how risk tolerance and its antecedents influence client decisions, have the potential to improve advice in the financial services industry. JEL Classification: D14

show abstract

“…Although prior studies have significantly contributed to the available literature of behavioral biases and investment decisions (Aren & Aydemir, 2015;Hoffmann et al, 2013;Johnson & Horan, 2013;Prosad et al, 2015). However, this study makes empirical contribution to the existing literature on investor's biases, financial literacy and portfolio diversification.…”

Section: Contribution Of the Studymentioning

confidence: 93%

“…Many researchers have focused on financial literacy, behavioral and psychological influence on investor's investment decision (Prosad, Kapoor, & Sengupta, 2015;Hoffmann, Post, & Pennings, 2013;Kumar & Goyal, 2016;Pikulina, Renneboog, & Tobler, 2017). Very few studies have focused on behavior and portfolio diversification (Shinagawa, 2014;Jacobs, Muller, & Weber, 2014;Fuertes, Muradoglu, & Ozturkkal, 2012;Mouna & Anis, 2015).…”

Section: Introductionmentioning

confidence: 99%

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

Anwar¹,

Khan²,

Rehman³

2017

j.financ.econ.res

View full text Add to dashboard Cite

The purpose of this study is to check the impact of financial literacy and behavioral biases on investor's portfolio diversification. Data were collected through questionnaire using sample size of 181 investors trading in Pakistan Stock Market. The results indicate that financial literacy has insignificant and positive influence on investor's portfolio diversification, behavioral biases such as familiarity and availability biases have insignificant and negative while overconfidence bias has significant negative impact on investor's portfolio diversification. Portfolio size also has significant positive impact on portfolio diversification. The findings suggest the implementation of financial literacy programs to facilitate the investors, trading in different stocks. The implications for practice were discussed in detail.

show abstract

Individual investor perceptions and behavior during the financial crisis

Cited by 344 publications

References 62 publications

Financial literacy, financial advice, and financial behavior

Financial literacy, financial advice, and financial behavior

The Influence of Financial Risk Tolerance on Investment Decision-Making in a Financial Advice Context

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

Contact Info

Product

Resources

About