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FinTech, Investor Sophistication, and Financial Portfolio Choices

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  • Leonardo Gambacorta
  • Romina Gambacorta
  • Roxana Mihet

Abstract

This paper analyzes the links between advances in financial technology, investors’ sophistication, and the composition and returns of their financial portfolios. We develop a simple portfolio choice model under asymmetric information and derive some theoretical predictions. Using detailed microdata from Banca d’Italia, we test these predictions for Italian households over the period 2004-2020. In general, heterogeneity in portfolio composition and in returns between sophisticated and unsophisticated investors grows with improvements in financial technology. This heterogeneity is reduced only if financial technology is accessible to everyone and if investors have a similar capacity to use it. (JEL: G1, G5, G4, D83, L8, O3)Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Leonardo Gambacorta & Romina Gambacorta & Roxana Mihet, 2023. "FinTech, Investor Sophistication, and Financial Portfolio Choices," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(4), pages 834-866.
    • Handle: RePEc:oup:rcorpf:v:12:y:2023:i:4:p:834-866.
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G5 - Financial Economics - - Household Finance
    • G4 - Financial Economics - - Behavioral Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L8 - Industrial Organization - - Industry Studies: Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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