What drives performance in the speculative market of short-term exchange-traded retail products?

Arbeitspapier

This paper considers the realized returns of individual investors in warrants and leverage certificates. First, we derive a general formula that analytically decomposes the return into several economically meaningful components that are related to investor's trading behavior and the issuers' price-setting strategy. Second, we use a large trade dataset to analyze returns along these components and also link them to investors' risk taking strategy. Our main findings are threefold: (i) The overall performance is poor. (ii) Investors show neutral timing skills, while the main performance driver is the issuers' price-setting. (iii) Higher risk taking by investors diminishes the performance further. Our results imply that retail investors do not achieve a pecuniary benefit from the considered financial innovations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Passauer Diskussionspapiere - Betriebswirtschaftliche Reihe ; No. B-26-17

Classification and Topics

• Classification: Management ; Market Structure, Pricing, and Design: General ; Portfolio Choice; Investment Decisions ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
• Subject: Leverage Certificate ; Warrant ; Financial Innovation ; Retail Investor ; Performance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baller, Stefanie ; Entrop, Oliver ; Schober, Alexander ; Wilkens, Marco
• Event: Veröffentlichung
• (who): Universität Passau, Wirtschaftswissenschaftliche Fakultät
• (where): Passau
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/179475
• Last update: 10.03.2025, 11:43 AM CET