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Risk taking in the market of speculative exchange-traded retail products: Do socio-economic factors matter?

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  • Baller, Stefanie

Abstract

When purchasing a financial product, investors may actively decide upon the risk they take. This paper analyzes the impact of investors' personal characteristics, location-based demographic factors and transaction-specific trading surroundings on their risk taking in the market of speculative exchange-traded retail products. Using a large trade dataset of warrants and leverage certificates on an individual investor level, I find evidence that risk taking behavior is strongly determined by the characteristics examined here: (i) Inexperienced young males with little secure status in their lives take more risk than other traders. (ii) Living in socially less desirable environments or encountering less risky trading conditions also supports risk taking. (iii) Risk taking is highly persistent. (iv) Finally, higher risk taking leads to poorer performance.

Suggested Citation

  • Baller, Stefanie, 2017. "Risk taking in the market of speculative exchange-traded retail products: Do socio-economic factors matter?," Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe B-27-17, University of Passau, Faculty of Business and Economics.
    • Handle: RePEc:zbw:upadbr:b2717
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    More about this item

    Keywords

    Leverage Certificate; Warrant; Private Investor; Risk Taking; Performance; Socio-Economic Factors;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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