Essays in household finance

Households around the world make investment mistakes by deviating markedly from the prescriptions of normative portfolio theory. This thesis extends the existing literature on investment mistakes in two major areas. It firstly provides evidence on the costs of insufficient international diversification and suboptimal fund selection processes. Secondly it investigates whether the selection of financial advisors based on externally observable factors helps reducing the propensity to make costly investment mistakes and whether employer provided training may be a useful tool to enhance the quality of financial advice. This book is geared towards lecturers and students with a special interest in financial economics and household finance. The content of the book may also prove useful to practitioners such as bankers or financial regulators.