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The 283th Wenlan Financial Forum
Topic： | How many financial advisers do you need? |
Speaker: | Youcheng Lou, Associate Researcher Academy of Mathematics and Systems Science, Chinese Academy of Sciences |
Host： | Chuanhai Zhang, Associate Professor School of Finance, Zhongnan University of Economics and Law Innovation and Talent Base for Digital Technology and Finance |
Time: | 14:30-16:00, Tuesday, September 26, 2023 |
Location: | South 408 Conference Room, Wenquan Building, ZUEL |
Abstract：
We study a rational expectations equilibrium economy where investors rely on suggestions of financial advisers to construct their investment strategies. Advisers observe signals about fundamentals and communicate the strategy that optimizes the expected utility of the investors given that information. Investors are of bounded rationality as they use the sum-of-weights-equals-one heuristic and are subject to price information neglect. Under these constraints, they optimally aggregate all strategies suggested by their advisers. We study how many advisers an investor should consult with and how much to expend on each of the advisers. When information is exogenous, investors should consult at least two advisers even if there is a large difference in the precision of their signals. However, it is not optimal to consult with all possible advisers unless their signal precision is relatively homogenous. When information is endogenous, it is typically the case that investors consult with a small number of advisers and spend an equal amount on each of their advisers under sufficient convexity of the information acquisition cost function. For example, under quadratic information acquisition costs, it is optimal to consult with exactly two advisers.
Speaker Introduction：
Youcheng Lou is an associate researcher at the Academy of Mathematics and Systems Science, Chinese Academy of Sciences. His main research interests include rational expectation equilibrium theory, financial market microstructure, behavioral finance, socioeconomic networks. He has published over 20 academic journal papers, including JET, JEDC, EJOR, IEEE TAC, Automatica, among others.He is currently an associate editor at IJET. He won the Xiangjiang Scholar Program Award in 2015, the Best Paper Award at the annual academic conference of the China information Economy Society in 2021 and 2022, and the Excellent Paper Award at the annual academic conference of the Chinese Society of Optimization, Overall Planning and Economical Mathematics in 2023.