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2019 Conference

May 21–23, 2019

Westin Arlington Gateway, Arlington, VA, USA

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A1a Can Financial Advice Serve as a Substitute for Financial Literacy in Equity Investing?

Tuesday, May 21, 2019 at 5:15 PM–6:45 PM EDT
F. Scott Fitzgerald A
Key Words

Financial Advisor, Financial Literacy, Substitute, Sample Selection Bias

Short Description

The purpose of this study is to examine whether working with a financial advisor can serve as a substitute for individual’s financial literacy when they make equity investment decisions. Using the 2016 Survey of Consumer Finance (SCF), this study adopts Heckman's (1977) method to control sample selection bias and analyzes the role of financial literacy in equity investment and its relation to the use of financial advisors. The results of this study show individuals with higher financial literacy are more likely to pay for financial advice, and more importantly, after alleviating the endogeneity caused by self-selection of seeking financial advice, the results suggest financial advice is not a sufficient substitute for financial literacy. These results have potential implications for households, researchers, financial educators, financial advisors, as well as policymakers.

First & Corresponding Author

Weipeng Wu, University of Missouri
Authors in the order to be printed

Weipeng Wu, Rui Yao

Additional Authors

Rui Yao, University of Missouri
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