The Efficiency of Structured Equity Products as Investment Vehicles

Abstract

In this paper we find that in the Swedish market principal protected notes (PPN) or an alternative replicating strategy of such kind, can be an adequate investment vehicle for retail investors with different sources of liquidity in periods of stable volatility and low interest rates. We assessed the fair value of such notes and compared the offered participation rates by the issuing financial institutions and found tendencies of overpricing for the index PPN at issuance. Our results illustrate how in addition of the capital protection, this type of structured products can be as profitable or more than other alternative investing choices.