Buy and sell decisional analysis of financial advisors

Behavioral finance has shown compelling evidence that individual investors make buy and sell decisions based on emotion. The next question is whether more knowledgeable and sophisticated financial advisors do also. The precise problem addressed within this research was whether financial advisors recommend that clients sell their winning stocks too early and hold onto losing stocks too long. The problem was addressed through use of a questionnaire designed to measure whether participants made their buy and sell decisions according to emotional criteria. Participants were financial advisors from three of the largest and well-known New York Stock Exchange brokerage firms. Ordinal variables were identified and statistical analysis was performed on the data obtained. A sequence of 5 x 5 contingency tables was constructed to test the research questions. A contingency table analysis based on measures of concordance and symmetry was used to compare responses to paired questions. The data did not affirmatively support the research questions at the 5% level. The results indicate that financial advisors are indeed less susceptible to emotional influences when making buy and sell decisions. Contributions to the field of knowledge are furthered by affirming utility theory assumptions are appropriate as to financial advisors, and disconfirming any possible extension of behavioral finance and the emotional decision-making patterns shown to be present with individuals to financial advisors. The implication is that there is value for individual investors to use financial advisors, as it leads to more stability in the buying and selling of stocks in an individual's portfolio.