Publications

When financial advice leads to positive performance: Evidence from repeated client-advisor interactions (2025, The Review of Financial Studies)

Does the performance of advisors’ recommendations influence investors’ propensity to seek advice again? I investigate a sample of calls between 10,063 German brokerage clients and financial advisors from 2005–2015. If advisors’ recommendations in the initial meeting led to positive (vs. negative) performance, investors are 2.1 times more likely to arrange a second meeting. This effect is driven by the performance of the recommendations the investor decided to follow. Investors with positive performance follow recommendations to a greater degree. The findings show that experiences matter in the advisory context and shape the demand for advice.

Private investors and the emergence of neo-brokers: Do investors pay higher execution prices at a neo-broker with payment-for-order-flow? (joint with Steffen Meyer and Lutz Johanning, 2025, Finance Research Letters (80)) 

We investigate the implicit trading costs of neo-broker clients using trading data of 100,000 clients at Trade Republic. Comparing execution prices at the neo-broker to Germany's reference market (Xetra) order book prices, we show that routing orders to one pre-specified trading venue leads to <1 % of transactions being executed at prices worse than on the reference market. In terms of total trading costs, customers benefit from this new trading venue because the trade-related costs other than the spread (explicit costs) are favorable compared to traditional online brokerages.

Ambiguity and private investors' behavior after forced fund liquidations (joint with Steffen Meyer, 2024, Journal of Financial Economics (156))

We investigate individual investors' decisions under time-varying ambiguity (VVIX) using plausibly exogenous forced mutual fund liquidations at a German brokerage. Investors reinvest 87% of forced liquidations when the refund occurs on a day of low ambiguity and 0% when it occurs on a day of high ambiguity. Instead of reinvesting, investors become inert and keep the refund in their cash holdings. The effect reverses approximately six months after the liquidation. If investors reinvest, they decrease their risk-taking under ambiguity. Our results are not driven by risk, rebalancing decisions, experiencing losses, or attention and are robust to alternative measures of ambiguity.

Switching from commissions on mutual funds to flat-fees: How are advisory clients affected? (joint with Steffen Meyer, Benjamin Loos, and Andreas Hackethal, 2023, Journal of Economic Behavior & Organization (209), 423-449)

Using a field study at a German brokerage, we investigate advised individual investors' behavior and outcomes after self-selecting into a flat-fee scheme (percentage of portfolio value) for mutual funds. In a difference-in-differences setting, we compare 699 switchers to propensity-score-matched advisory clients who remained in the commission-based scheme. Switchers increase their portfolio values, improve portfolio  diversification, and increase their portfolio performance. They also demand more financial advice and follow more advisor recommendations. We argue that switchers attribute a higher quality to the unchanged advisory services.

Ambiguity and Investor Behavior (joint with Dimitrios Kostopoulos and Steffen Meyer, 2022, Journal of Financial Economics (145), 277-296)

We relate time-varying aggregate ambiguityabout volatility (V-VSTOXX) to individual investor trading. We use a unique data set on the trading records of more than 100,000 individual investors from a large German discount brokerage from March 2010 to December 2015. We find that an increase in ambiguity is associated with increased investor activity. It also leads to a reduction in risk-taking, which does not reverse over the following days. Ambiguity averse investors are more prone to ambiguity shocks. These results replicate when using the dispersion of professional forecasters as a long-term measure of ambiguity and are robust when controlling for newspaper- or market-based ambiguity measures.

The Ulysses option: Smoking and delegation in individual investor decisions (joint with Steffen Meyer, 2022, Finance Research Letters (46))

Are smokers more likely to seek and follow financial advice? We build on literature which shows that investors who smoke have self-control issues and trade impulsively. We empirically measure self-control failures by identifying cigarette addiction in a sample of German brokerage clients and show that smokers are more likely to delegate their decisions to financial advisors which work like a commitment device. Potential endogeneity issues and self-selection are addressed by using propensity score matching. Despite advisor incentives, such commitments work successfully in lowering overtrading, improving investment biases and increasing performance of low self-control investors. 

Smoking hot portfolios: Trading behavior, investment biases, and self-control failure (joint with Steffen Meyer and Andreas Hackethal, 2021, Journal of Empirical Finance (63), 73-95)

One out of four individuals smoke. Smokers have been shown to be more impulsive. Using German brokerage data we reveal smokers by their tobacco purchases and analyze whether this habit affects investment behavior. We compare the trading behavior between 3,553 smokers and 10,091 nonsmokers. Smokers are associated with a higher portfolio turnover unexplained by financial sophistication or wealth effects. As a mechanism we find that smoking exacerbates well-known biases such as overconfidence, social contagion, sensation seeking, or attention grabbing. Overall, smoking is costly because it increases the gap between the gross and net returns of smokers relative to nonsmokers.

Google search volume and individual investor trading (joint with Dimitrios Kostopoulos and Steffen Meyer, 2020, Journal of Financial Markets (49))

We relate Google search volumes, which are a proxy for the economic concerns of households (the FEARS index), to the trading behavior of approximately 100,000 individual German online-brokerage clients. We find that when the FEARS index is high, individual investors trade out of risky assets. Additionally, we find that the FEARS index has a negative short-horizon relation to stock market returns, which reverses over the following six days. This shows that the effect of economic concerns on the market is temporary, whereas on individual investors, the effect does not reverse within the next 20 days. In addition, we find that less sophisticated investors are more prone to sentiment.