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When financial advice rocks the market

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  • Cuevas, Conrado
  • Bernhardt, Dan

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.

Suggested Citation

  • Cuevas, Conrado & Bernhardt, Dan, 2023. "When financial advice rocks the market," Emerging Markets Review, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:ememar:v:56:y:2023:i:c:s1566014123000560
    DOI: 10.1016/j.ememar.2023.101051
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    References listed on IDEAS

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