Probability misestimation and preferencesin financial investment decision

We study the influence of systematic probability misestimation on complexfinancial investment decisions on the context of structured financialproducts. Structured products have in recent years become more and morecomplex. We study the question whether this complexity might be a sophisticatedmethod to exploit systematic biases in probability estimation ofinvestors in order to make products look safer and more attractive than theyactually are.[...]

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Year of publication:	2008-11-21
Authors:	Rieger, Marc Oliver
Institutions:	Institut für Schweizerisches Bankwesen <Zürich>
Subject:	Finanzierung \| finance \| Index \| Investitionsentscheidung

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1 Introduction
2 Experimental setup
2.1 Setup and incentives
2.2 Probability estimates
2.3 Preferences and judgements on structured products
2.4 Risk aversion
3 Results
3.1 Why are barrier features attractive?
3.2 Why are worst-of baskets attractive?
3.3 Can one de-bias investors?
4 Conclusions
References

Persistent link: https://www.econbiz.de/10005868835