Investor Experience and Portfolio Choice: Regulatory Costs from MiFID II

MiFID II forces banks and wealth managers to ask clients for their investment knowledge and experience. The implied regulatory view is that less e ...

Author(s):

Sebastian Lehner

MiFID II forces banks and wealth managers to ask clients for their investment knowledge and experience. The implied regulatory view is that less experience should result in less risk taking. While this is neither shared in theoretical nor in empirical finance, it becomes a source of legal risk for asset managers and banks. How do banks react? What are the welfare implications? So far, this question was impossible to answer. The relevant data have not been available as they are not shared by banks. The authors circumvent this problem by using publicly available portfolio recommendations from robo-advisory firms.

They find that less educated and less experienced investors receive on average lower recommended equity allocations. This ingrains rather than corrects behavioural biases.

Type: EDHEC Publication
Date: le 12/04/2021
Research Cluster : Finance

See Also

Financing your MBA - are you eligible for a scholarship?
News
- 06-10-2021
How to finance your Global MBA abroad is a critical question you need to think about...
Sense and shape the future: EDHEC Online Strategic Foresight Certificate
News
- 16-09-2021
Today’s business context demands that leaders display curiosity, flexibility and...
FT MiM 2021 ranking: EDHEC’s Master in Management joins world’s top 10
News
- 13-09-2021
EDHEC Business School joins the world’s top 10 Master in Management (MiM) programmes in...
Top-ranked EDHEC Global MBA programme curriculum key updates
News
- 10-09-2021
We are excited to announce that our top-ranked Global MBA programme curriculum has been...