References (38)


Citations (2)



Why are British Premium Bonds so Successful? The Effect of Saving With a Thrill

Sebastian Lobe

University of Regensburg; Center of Finance

Alexander Hölzl

University of Regensburg

April 2007

The British Premium Bond, which offers a monthly uncertain return solely based on a lottery, is an immense success. Why? We find that the bond bears relatively low risk in terms of CARA and CRRA utility. Since prizes are tax-free, the higher an individual's tax bracket, the more it pays to invest in the lottery bond. However, we demonstrate that the CARA and CRRA coefficients (before and after taxes) do not directly influence sales of the Premium Bond. Rather, our ARIMA model strongly suggests that prize skewness and the maximum holding amount are the salient influencing factors.

Number of Pages in PDF File: 42

Keywords: Premium Bond, lottery bond, risk tolerance, skewness

JEL Classification: G12, G11

Download This Paper

Date posted: March 19, 2008  

Suggested Citation

Lobe, Sebastian and Hölzl, Alexander, Why are British Premium Bonds so Successful? The Effect of Saving With a Thrill (April 2007). Available at SSRN: http://ssrn.com/abstract=992794 or http://dx.doi.org/10.2139/ssrn.992794

Contact Information

Sebastian Lobe (Contact Author)
University of Regensburg ( email )
Universitaetsstrasse 31
Regensburg D-93053
+49 (0)941 943-2727 (Phone)
+49 (0)941 943-4979 (Fax)
HOME PAGE: http://www-cgi.uni-regensburg.de/Fakultaeten/WiWi/roeder/lobe.htm
Center of Finance ( email )
HOME PAGE: http://www.center-of-finance.de/en/pd-dr-sebastian-lobe
Alexander Hölzl
University of Regensburg ( email )
93040 Regensburg
D-93040 Regensburg
Feedback to SSRN

Paper statistics
Abstract Views: 3,253
Downloads: 396
Download Rank: 44,743
References:  38
Citations:  2

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.312 seconds