Brokers versus Retail Investors: Conflicting Interests and Dominated Products

• 成果类型: Article
• 署名作者: Egan, Mark
• 署名单位: Harvard University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12763
• 发表日期: 2019
• 页码: 1217-1260
• 关键词: MORTGAGE-MARKET; price; INFORMATION; search; performance; obfuscation; COMPETITION; choices; models; COSTS

摘要

I study how brokers distort household investment decisions. Using a novel convertible bond data set, I find that consumers often purchase dominated bonds-cheap and expensive otherwise-identical bonds coexist in the market. Brokers are incentivized to sell the dominated bonds, typically earning two times greater fees for selling them. I develop and estimate a broker-intermediated search model that rationalizes this behavior. The estimates indicate that costly search is a key friction in financial markets, but the effects of search costs are compounded when brokers are incentivized to direct the search of consumers toward high-fee inferior products.