Non-exclusive financial advice

Salvatore Piccolo, Giovanni W. Puopolo, Luis Vasconcelos

Research output: Contribution to journalArticle

Abstract

We propose a simple model of non-exclusive financial advice in which two households rely on a self-interested (common) expert to make their investment choices. There is only one source of risk, and the expert is privately informed about the risky asset's volatility. When monetary transfers are unenforceable, we show that investors may delegate their investment decisions to the expert. When doing so, however, they impose restrictions on her choices which crucially depend on whether the expert perceives investors' asset allocations as complements or as substitutes. Finally, we analyze the implications of non-exclusivity in financial advice on investment behavior and welfare, and highlight a set of novel testable implications.

Original languageEnglish
Pages (from-to)2079-2123
Number of pages45
JournalReview Of Finance
Volume20
Issue number6
DOIs
Publication statusPublished - 1 Oct 2016

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