Do Investors in Structured Products Act Rationally?

28 Pages Posted: 24 Sep 2007  

Rene Fischer

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Date Written: August 22, 2007

Abstract

This study analyzes the strategies individual investors pursue when Purchasing structured products. Using a survey among almost 800 German investors we find that they mostly show rational investment motives like diversifying or reducing cost. However, a considerable part shows irrational and/or inconsistent strategies. Higher risk attitude and investment activity are connected with this irrational behavior. Financial advice has a positive effect on investment strategies of individual investors.

We encourage consideration of these Findings when explaining common investment mistakes like overtrading or underdiversification. Certain investor groups seem to be driven by other motives than suggested by standard Financial Theory.

Keywords: Household Portfolio, Investment Strategy, Structured Products, Individual Investor

JEL Classification: D14, G11

Suggested Citation

Fischer, Rene, Do Investors in Structured Products Act Rationally? (August 22, 2007). Available at SSRN: https://ssrn.com/abstract=1011008 or http://dx.doi.org/10.2139/ssrn.1011008

Rene Fischer (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

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