The demand for structured products: an experimental approach
AbstractStructured investment funds showed an important growth in the mutual fund industry. We analyze this type of fund’s demand using the experimental methodology which gives us perfect control over the characteristics of the funds and the information provided to the investor. Different types of structured guaranteed funds, with fixed combinations of secured and additional benefits, are sequentially offered to university students who act as investors. Subjects also have the alternative possibility to buy bonds. Our results show that information available to investors, and particularly the order in which this information is presented, generates significant biases in their decision making which can have both positive and negative consequences on their financial behavior. In fact, when the investment alternatives are made easier to compare, too good to be true investment offers get more easily spotted, whereas funds whose performance shows an apparently positive trend result overvalued in comparison to bonds.
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Bibliographic InfoPaper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2012/15.
Length: 33 pages
Date of creation: 2012
Date of revision:
investor behavior; experiment; guaranteed investment fund.;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
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- Kliger, Doron & Levy, Ori & Sonsino, Doron, 2003. "On absolute and relative performance and the demand for mutual funds--experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 341-363, November.
- Simone Alfarano & Iván Barreda-Tarrazona & Eva Camacho-Cuena, 2006. "On the role of heterogeneous and imperfect information in a laboratory financial market," Central European Journal of Operations Research, Springer, vol. 14(4), pages 417-433, December.
- Ajay Khorana & Henri Servaes, 2011. "What Drives Market Share in the Mutual Fund Industry?," Review of Finance, European Finance Association, vol. 16(1), pages 81-113.
- Iván Barreda-Tarrazona & Juan Matallín-Sáez & Mª Balaguer-Franch, 2011. "Measuring Investors’ Socially Responsible Preferences in Mutual Funds," Journal of Business Ethics, Springer, vol. 103(2), pages 305-330, October.
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