Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/179475 
Year of Publication: 
2017
Series/Report no.: 
Passauer Diskussionspapiere - Betriebswirtschaftliche Reihe No. B-26-17
Publisher: 
Universität Passau, Wirtschaftswissenschaftliche Fakultät, Passau
Abstract: 
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.
Subjects: 
Leverage Certificate
Warrant
Financial Innovation
Retail Investor
Performance
JEL: 
D40
G11
G21
G24
Document Type: 
Working Paper

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