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Investor self-selection: evidence from a mutual fund survey

Author

Listed:
  • Gordon J. Alexander
  • Jonathan D. Jones

    (Risk Management Division, Office of Thrift Supervision, Washington, DC 20552, USA)

  • Peter J. Nigro

    (Economic and Policy Analysis, Office of the Comptroller of the Currency, Washington, DC 20219, USA)

Abstract

Using survey data on a random sample of 2000 mutual fund investors, we classify investors by their level of financial literacy and their place of mutual fund purchase. After using a probit model to separately estimate the determinants of an investor's choice of distribution channel and level of financial literacy, a bivariate probit model that jointly endogenizes an investor's level of financial literacy and choice of distribution channel is estimated. Strong evidence that an investor's level of financial literacy and choice of distribution channel are jointly determined is found. Thus, the hypothesis put forth in this paper, that investors self-select into different distribution channels based on their overall level of financial literacy, is supported by the data. © 1997 John Wiley & Sons, Ltd.

Suggested Citation

  • Gordon J. Alexander & Jonathan D. Jones & Peter J. Nigro, 1997. "Investor self-selection: evidence from a mutual fund survey," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(7-8), pages 719-729.
    • Handle: RePEc:wly:mgtdec:v:18:y:1997:i:7-8:p:719-729
    DOI: 10.1002/(SICI)1099-1468(199711/12)18:7/8<719::AID-MDE859>3.0.CO;2-A
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    Cited by:

    1. Mark Grinblatt & Seppo Ikäheimo & Matti Keloharju & Samuli Knüpfer, 2016. "IQ and Mutual Fund Choice," Management Science, INFORMS, vol. 62(4), pages 924-944, April.
    2. Lapanan, Nicha, 2018. "The investment behavior of socially responsible individual investors," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 214-226.
    3. Sanjay Kumar Mishra & Manoj Kumar, 2012. "A comprehensive model of information search and processing behaviour of mutual fund investors," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 17(1), pages 31-49, April.
    4. Mouna, Amari & Anis, Jarboui, 2017. "Financial literacy in Tunisia: Its determinants and its implications on investment behavior," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 568-577.

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