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Article
Publication date: 20 August 2018

Martin R.W. Hiebl, Rainer Baule, Andreas Dutzi, Volker Stein and Arnd Wiedemann

1073

Abstract

Details

The Journal of Risk Finance, vol. 19 no. 4
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 8 March 2021

Rainer Baule and Patrick Muenchhalfen

The authors evaluate the preferences of retail investors with regard to the investment in structured financial products. The purpose of the paper is an analysis of the relative…

Abstract

Purpose

The authors evaluate the preferences of retail investors with regard to the investment in structured financial products. The purpose of the paper is an analysis of the relative importance of key product attributes namely the issuing bank, the product structure, the associated costs and the disclosed risk.

Design/methodology/approach

The authors conduct a choice-based conjoint analysis, based on an online experiment. Participants judge their preferences for products which are presented by shortened key information documents according to the requirements of EU regulation.

Findings

Investors consider the costs and the product structure to be most important, whereas the issuer and information on risk are of less interest. Their preferences depend on their (self-evaluated) expertise: while inexperienced retail investors concentrate on costs, experienced investors pay more attention to the product structure.

Research limitations/implications

The study is limited to a subsegment of the market, the discount certificates. For these products, issuing banks gain insight into the attractiveness of their products. Furthermore, the study carries implications for regulators: since investors emphasize the costs in their decisions, an unbiased disclosure of costs should be enforced.

Originality/value

While the recent literature has studied preferences for the investment in mutual funds, this is the first paper which directly analyzes the drivers of an investment in structured retail products.

Details

Review of Behavioral Finance, vol. 14 no. 2
Type: Research Article
ISSN: 1940-5979

Keywords

Article
Publication date: 1 February 2016

Philip Blonski and Simon Christian Blonski

The purpose of this study is to question the undifferentiated treatment of individual traders as “dumb noise traders?”. We question this undifferentiated verdict by conducting an…

1456

Abstract

Purpose

The purpose of this study is to question the undifferentiated treatment of individual traders as “dumb noise traders?”. We question this undifferentiated verdict by conducting an analysis of the cognitive competence of individual investors.

Design/methodology/approach

The authors let experts (both experienced researchers as well as practitioners) assess the mathematical and verbal reasoning demands of investment tasks investigated in previous studies.

Findings

Based on this assessment, this paper concludes that individual investors are able to perform a number of complex cognitive actions, especially those demanding higher-order verbal reasoning. However, they seem to reach cognitive limitations with tasks demanding greater mathematical reasoning ability. This is especially unfortunate, as tasks requiring higher mathematical reasoning are considered to be more relevant to performance. These findings have important implications for future regulatory measures.

Research limitations/implications

This study has two non-trivial limitations. First, indirect measurement of mental requirements does not allow authors to make definite statements about the cognitive competence of individual investors. To do so, it would be necessary to conduct laboratory experiments which directly measure performance of investors on different investment and other cognitively demanding tasks. However, such data are not available for retail investors on this market to the best of the authors’s knowledge. We therefore think that our approach is a valuable first step toward understanding investors’ cognitive competence using data that are available at this moment. Second, the number of analyzed (and available) tasks is rather low (n = 10) which limits the power of tests and restricts the authors from using more profound (deductive) statistical analyses.

Practical implications

This paper proposes to illustrate information in key investor documents mostly verbally (e.g. as proposed by Rieger, 2009), compel exchanges and issuers of retail derivatives to create awareness for the results of the reviewed studies and our conclusion and to offer online math trainings especially designed for individual investors to better prepare them for different trading activities, as these have been shown to be as effective as face-to-face trainings (Frederickson et al., 2005; Karr et al., 2003).

Social implications

This study can only be considered as a first step toward understanding the cognitive limitations of individual investors indirectly and could be transferred to other market areas as well.

Originality/value

This study is the first to combine the assessment of outstanding researchers in this field with the results of previous studies. In doing so, this paper provides an overarching framework of interpretation for these studies.

Details

Qualitative Research in Financial Markets, vol. 8 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

Content available
Article
Publication date: 12 January 2022

Martin R.W. Hiebl

Abstract

Details

Journal of Accounting & Organizational Change, vol. 18 no. 1
Type: Research Article
ISSN: 1832-5912

Content available
Article
Publication date: 11 November 2019

Martin Hiebl

Abstract

Details

Management Research Review, vol. 42 no. 11
Type: Research Article
ISSN: 2040-8269

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