Do Investors in Structured Products Act Rationally?
28 Pages Posted: 24 Sep 2007
Date Written: August 22, 2007
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: Suggested Citation