Investor self-selection: Evidence from a mutual fund survey

Gordon J. Alexander, Jonathan D. Jones, Peter J. Nigro

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

Using survey data on a random sample of 2000 mutual fund investors, we classify investors by their level of financial literacy and their place of mutual fund purchase. After using a probit model to separately estimate the determinants of an investor’s choice of distribution channel and level of financial literacy, a bivariate probit model that jointly endogenizes an investor’s level of financial literacy and choice of distribution channel is estimated. Strong evidence that an investor’s level of financial literacy and choice of distribution channel are jointly determined is found. Thus, the hypothesis put forth in this paper, that investors self-select into different distribution channels based on their overall level of financial literacy, is supported by the data.

Original languageEnglish (US)
Pages (from-to)719-729
Number of pages11
JournalManagerial and Decision Economics
Volume18
Issue number7-8
DOIs
StatePublished - Jan 1 1997

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