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The investor in warrants

Author

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  • Victor Mendes Santos

    (CMVM-Portuguese Securities Commission)

Abstract

This paper investigates the profile of the individual investor in warrants. It is concluded that the average investor in warrants has a greater level of financial literacy and a greater appetite for risk. It is also concluded that higher experience in stock trading and the investment in foreign stocks facilitate the investment in warrants, which may be a result of learning by trading and of greater competence of investors. However, lower returns from the investment in stocks also favor the investment in warrants, which may mean that (at least some) warrant investors look to this market as an alternative to recover from their minor success with investments in stocks. Finally, overconfidence encourages the investment in warrants and this may lead to unsound decision-making.

Suggested Citation

  • Victor Mendes Santos, 2012. "The investor in warrants," CEFAGE-UE Working Papers 2012_19, University of Evora, CEFAGE-UE (Portugal).
  • Handle: RePEc:cfe:wpcefa:2012_19
    as

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    File URL: http://www.cefage.uevora.pt/en/content/download/3087/41142/version/1/file/2012_19.pdf
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    References listed on IDEAS

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    Cited by:

    1. Margaria Abreu, 2017. "HOW Biased is the Behavior of the Individual Investor in Warrants?," Working Papers Department of Economics 2017/18, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    2. Margarida Abreu, 2017. "How Biased is the Behavior of the Individual Investor in Warrants?," Working Papers REM 2017/07, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

    More about this item

    Keywords

    Warrants; Individual investor; Behavioral finance.;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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