Utility evaluation of structured products: was it a sound decision to practically ban structured products in Norway?

Abstract

This master thesis in behavioral finance investigates whether it was a sound decision to practically ban structured products from the Norwegian markets. The thesis also discusses the relationship between culture and investment behavior. The prospect theory analysis shows that an irrational investor can increase his utility by investing in structured products compared to the alternative investments. Contrarily, a rational investor will halve his utility by doing the same. The main conclusion is that investing in structured products is irrational, and that it was a sound decision to practically ban structured products from the Norwegian market. An investigation of the potential link between cultural dimensions and investment choices and behavior concludes that a Swiss investor has more than 50 percent greater utility from the access to structured products than a Norwegian investor, which strengthens the hypothesis of a close relationship between cultural dimensions and investment choices.