Working Paper: CEPR ID: DP9922
Authors: Dimitris Georgarakos; Roman Inderst
Abstract: We introduce professional financial advice in households? choice to hold risky financial assets. Consistent with the predictions from a formal model, we present evidence that households? trust in financial advice only matters when their perceived own financial capability is low. Instead, for households with higher financial capability, only the perception of legal protection in financial markets matters for stock market participation. Our empirical analysis highlights economically significant differences in households? perception of their rights as consumers of financial services, even when their objective circumstances should not be much different.
Keywords: Consumer Protection; Financial Advice; Household Finance; Trust
JEL Codes: D8; E1; G2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Trust in financial advice (G53) | Stock market participation (G19) |
| Perceived financial capability (G53) | Stock market participation (G19) |
| Perceived legal rights (P14) | Stock market participation (G19) |
| Trust in financial advice and Perceived legal rights (G18) | Stock market participation (G19) |