Ex-Post Structured Product Returns: Index Methodology and Analysis

23 Pages Posted: 6 Nov 2013 Last revised: 6 Nov 2016

See all articles by Geng Deng

Geng Deng

Wells Fargo

Tim Dulaney

Securities and Exchange Commission

Tim Husson

Securities and Exchange Commission

Craig J. McCann

Securities Litigation and Consulting Group

Mike Yan

Securities Litigation and Consulting Group

Date Written: January 28, 2014

Abstract

The academic and practitioner literature now includes numerous studies of the substantial issue date mispricing of structured products but there is no large scale study of the ex-post returns earned by US structured product investors. This paper augments the current literature by analyzing the ex-post returns of over Prods individual structured products issued by 13 brokerage firms since 2007. We construct our structured product index and sub-indices for reverse convertibles, single-observation reverse convertibles, tracking securities, and autocallable securities by valuing each structured product in our database each day.

The ex-post returns of US structured products are highly correlated with the returns of large capitalization equity markets in the aggregate but individual structured products generally underperform simple alternative allocations to stocks and bonds. The observed underperformance of structured products is consistent with the significant issue date underpricing documented in the literature.

Keywords: structured products, index, valuation, finance, mispricing

Suggested Citation

Deng, Geng and Dulaney, Tim and Husson, Tim and McCann, Craig J. and Yan, Mike, Ex-Post Structured Product Returns: Index Methodology and Analysis (January 28, 2014). Journal of Investing, Vol. 24, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=2350285 or http://dx.doi.org/10.2139/ssrn.2350285

Geng Deng

Wells Fargo ( email )

1753 Pinnacle Dr
7th Floor
Mc Lean, VA Virginia 22102
United States

Tim Dulaney

Securities and Exchange Commission ( email )

100 F Street, NW
Washington, DC 20549-1105
United States

Tim Husson (Contact Author)

Securities and Exchange Commission ( email )

100 F Street, NE
Washington, DC Washington, DC 20549
United States
202-551-6803 (Phone)

Craig J. McCann

Securities Litigation and Consulting Group ( email )

3998 Fair Ridge Drive, Suite 250
Fairfax, VA 22033
United States

Mike Yan

Securities Litigation and Consulting Group ( email )

3998 Fair Ridge Drive, Suite 250
Fairfax, VA 22033
United States
7035396780 (Phone)

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