Portfolio Inertia and Stock Market Fluctuations

Bilias, Yannis; Georgarakos, Dimitris; Haliassos, Michael

doi:10.2139/ssrn.905872

Cited by 71 publications

(88 citation statements)

References 41 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A related strand of literature analyzes the association between financial literacy and trading behavior (e.g., Feng and Seasholes 2005;Bilias et al 2010;Hoffmann et al 2013;Bucher-Koenen and Ziegelmeyer 2014;Guiso and Viviano 2015) and the corresponding studies generally document a positive impact of financial literacy as financially sophisticated investors tend to commit less investment mistakes. 34 In a recent contribution, Bucher-Koenen and Ziegelmeyer (2014) use the financial crisis as a natural experiment to examine individual investors' ability to cope with sudden economic shocks and document that low literate households are significantly more likely to sell off assets that have lost in value, thereby making paper losses permanent.…”

Section: Investment Choicesmentioning

confidence: 99%

“…37 Indeed, a large proportion of households seek expert advice when making financial decisions. Bluethgen et al (2008) indicate that roughly 80% of individual investors in Germany turn to financial advisors for their investment decisions. In the U.S., 81% of the households investing in mutual funds, outside a retirement plan, rely on financial advice (ICI 2007), and 75% of them seek advice before conducting stock market or mutual fund transactions .…”

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

“…While some studies concerned with household finance suggest that financial counseling can help individuals develop better financial practices and reduce their debt levels and delinquency rates (Collins and O'Rouke 2010;Agarwal et al 2011), the evidence as to whether individuals' investment decisions benefit from expert financial advice is rather mixed. It could be shown that professionally-managed portfolios are better diversified (Bluethgen et al 2008;Gerhardt and Hackethal 2009) and exhibit weaker disposition effects (Shapira and Venezia 2001) than portfolios of self-directed retail investors. 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).…”

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

See 2 more Smart Citations

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: Investment Choicesmentioning

confidence: 99%

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

Section: Financial Advice Versus Financial Educationmentioning

confidence: 99%

See 1 more Smart Citation

Financial literacy, financial advice, and financial behavior

2017

View full text Add to dashboard Cite

show abstract

“…As Bilias, Georgarakos and Haliassos (2010) note, widespread portfolio inertia means that more than half of households do not trade stocks in their portfolios for extended periods of time. In many cases, investors do not actively rebalance their portfolios, but rather follow a passive buy-and-hold strategy.…”

Section: Redefining Investment Level Changesmentioning

confidence: 99%

Myopic loss aversion and stock investments: An empirical study of private investors

Lee

Veld‐Merkoulova

2016

Journal of Banking & Finance

View full text Add to dashboard Cite

Myopic loss aversion was suggested by Benartzi and Thaler (1995) as an explanation for the equity premium puzzle. Its main prediction is that loss averse investors, who evaluate their investment performance too frequently and therefore often observe small losses on their stock portfolios, would invest too little in equity. We investigate the link between myopic loss aversion and actual investment decisions of individual investors, using survey data. Our results are consistent with the predictions of Benartzi and Thaler. Higher myopic loss aversion is associated with lower stock investment as a share of total assets. Investors tend to evaluate their stock portfolio performance too often, which contributes to the prevalence of myopic loss aversion. The effect of myopia is most apparent when investors both evaluate their portfolios frequently and trade stocks regularly.

show abstract

“…We allow for unrestricted correlations between error terms of the five underlying latent indices. 9 Table 4 shows summary statistics of our conditioning variables that have been found in the literature to be good predictors of stockholding (for examples that use the SCF see Bertaut and Starr-McCluer, 2001;Shum and Faig, 2006;Bilias, Georgarakos and Haliassos, 2010). 10 A full set of variable definitions is included in the Technical Appendix RA.II.…”

Section: Econometric Specificationmentioning

confidence: 99%

Stockholding: Participation, location, and spillovers

Christelis

Georgarakos

Haliassos

2011

Journal of Banking & Finance

Self Cite

View full text Add to dashboard Cite

This paper provides the first joint analysis of household stockholding participation, location among stockholding modes, and participation spillovers. Our model matches observed participation, conditional and unconditional, and asset location patterns. We find that financial sophistication correlates strongly only with direct stockholding and mutual fund participation, while social interactions mainly influence stockholding through retirement accounts. Whether retirement account owners include7 stocks in them strongly depends on owner characteristics, unlike with mutual fund owners and investment in stock funds. Stockholding is more common among retirement account owners, but mainly because of owner characteristics rather than spillovers from retirement account ownership. JEL Classification Codes: G11, E21, D14, C35.

show abstract

Portfolio Inertia and Stock Market Fluctuations

Cited by 71 publications

References 41 publications

Financial literacy, financial advice, and financial behavior

Financial literacy, financial advice, and financial behavior

Myopic loss aversion and stock investments: An empirical study of private investors

Stockholding: Participation, location, and spillovers

Contact Info

Product

Resources

About