Abstract

http://ssrn.com/abstract=1342360
 
 

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Why do Investors Buy Structured Products?


Thorsten Hens


University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute (Zurich Center)

Marc Oliver Rieger


University of Trier

February 10, 2009

EFA 2009 Bergen Meetings Paper

Abstract:     
Structured investment products, also known as equity- or index-linked notes, have become immensely popular among retail investors in the last ten years. In this paper, however, we show that for classical rational investors the utility gains from structured products are typically much smaller than their fees - even on highly competitive markets with comparably low margins for issuers. The demand for the majority of products can only be explained by behavioral factors, specifically loss aversion, gambling to avoid sure losses, probability weighting, misestimation and overconfidence.

Number of Pages in PDF File: 31

Keywords: structured products, equity-linked notes, index-linked notes, Behavioral Finance, CAPM

JEL Classification: G11, D14, C61, D03, D18

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Date posted: February 16, 2009 ; Last revised: August 18, 2011

Suggested Citation

Hens, Thorsten and Rieger, Marc Oliver, Why do Investors Buy Structured Products? (February 10, 2009). EFA 2009 Bergen Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1342360 or http://dx.doi.org/10.2139/ssrn.1342360

Contact Information

Thorsten Hens (Contact Author)
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)
Norwegian School of Economics and Business Administration (NHH)
Helleveien 30
Bergen, 5045
Norway
Swiss Finance Institute (Zurich Center)
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
Marc Oliver Rieger
University of Trier ( email )
15, Universitaetsring
Trier, 54286
Germany
HOME PAGE: http://www.banking-finance.uni-trier.de
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