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Analyzing CFD Retail Investors' Performance in a Post MiFID II Environment

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  • Petar Peshev

Abstract

In this scientific article, the performance of retail investors trading contracts for differences offered by EU regulated investment firms has been analysed. The aim of the study is to identify common patterns of behaviour and the determinants of holding period returns and risk aversion in general and in a post-MiFID II environment. More than 80% of clients in this sample are losing money and a panel econometric examination reveals that low equity and high used margin-to-equity ratios are among the biggest contributors for negative holding period returns. Used margin-to-equity ratios are affected by equity size and by the holding period returns. Regulatory changes due to MiFID II implementation and due to the introduction of a restriction on the sale of contracts for differences are affecting holding period returns and used margin-to-equity ratios, perhaps not as intended and expected.

Suggested Citation

  • Petar Peshev, 2021. "Analyzing CFD Retail Investors' Performance in a Post MiFID II Environment," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 53-73.
    • Handle: RePEc:bas:econst:y:2021:i:4:p:53-73
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    File URL: https://www.iki.bas.bg/Journals/EconomicStudies/2021/2021-4/3_Peshev.pdf
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    References listed on IDEAS

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    Cited by:

    1. Philip W. S. Newall & Leonardo Weiss-Cohen, 2022. "The Gamblification of Investing: How a New Generation of Investors Is Being Born to Lose," IJERPH, MDPI, vol. 19(9), pages 1-10, April.

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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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