Center for Advanced Management




Prof. Markku Kaustia (Aalto University)


  • Datum: 16.11.2016
    Zeit: 17.15 - 18.45
    Ort: Schackstr. 4, 3. OG, Raum 307
    Titel: Skill substitution in finance? Evidence from financial advisor exam scores and return expectations


We build an index of financial sophistication using data from financial advisers’ professional exam scores and other variables. We find that less sophisticated advisors have higher return expectations for the general stock market. The nature of the optimism seems dispositional, rather than strategic or time varying, due to recent market conditions, for instance. Over the long-term, skill dominates in advisor career performance. A plausible account of the results as a whole is that unconscious overoptimism helps less capable advisers in the earlier stages of their careers, including finding employment. We present evidence against alternative explanations, such as overconfidence, risk-preference, unobserved heterogeneity, and signaling.