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Sources of information and portfolio allocation

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  • Shin, Su Hyun
  • Kim, Kyoung Tae
  • Seay, Martin

Abstract

This research investigates the relationship between how a household receives financial information and the degree to which investment portfolios are diversified. Diversification is measured as allocation across asset classes and share of assets held in each asset class. Propensity score-based techniques incorporating stratification and weighting are employed to better isolate causal links, while also controlling for objective and subjective financial literacy and overconfidence. Results indicate that the use of financial planners and brokers is associated with an increase in asset class diversification. Households that consult with financial planners and bankers allocate their wealth systematically different from those who do not. These results highlight the role that financial professionals play in helping households make investment decisions.

Suggested Citation

  • Shin, Su Hyun & Kim, Kyoung Tae & Seay, Martin, 2020. "Sources of information and portfolio allocation," Journal of Economic Psychology, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:joepsy:v:76:y:2020:i:c:s0167487018303696
    DOI: 10.1016/j.joep.2019.102212
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    References listed on IDEAS

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    Cited by:

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    2. Andrej Cupák & Pirmin Fessler & Joanne W. Hsu & Piotr R. Paradowski, 2020. "Confidence, Financial Literacy and Investment in Risky Assets: Evidence from the Survey of Consumer Finances," Finance and Economics Discussion Series 2020-004, Board of Governors of the Federal Reserve System (U.S.).
    3. Hyungkee Young Baek & David D. Cho, 2022. "Overconfidence and risky investment choices," Economics Bulletin, AccessEcon, vol. 42(4), pages 2267-2278.
    4. Sunder, Aman & Palmer, Lance & Chatterjee, Swarn & Goetz, Joseph, 2024. "Benefits of consistent and comprehensive financial advice during the Great Recession," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    5. Cupák, Andrej & Fessler, Pirmin & Hsu, Joanne W. & Paradowski, Piotr R., 2022. "Investor confidence and high financial literacy jointly shape investments in risky assets," Economic Modelling, Elsevier, vol. 116(C).
    6. Huang, Bin & Wang, Bin & Chen, Zixuan, 2024. "Individual investment adaptations to COVID-19 lockdowns," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    7. Wu, Kun & Li, Yanhong & Cai, Xianjun & Yin, Junming, 2022. "Cognitive ability and household portfolio diversification: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    8. Mugerman, Yevgeny & Sade, Orly & Winter, Eyal, 2020. "Out-of-pocket vs. out-of-investment in financial advisory fees: Evidence from the lab," Journal of Economic Psychology, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    Information; Diversification; Financial advisor; Financial literacy; Overconfidence;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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