Overview

Project status: Completed

This report was commissioned by the Australian Securities and Investments Commission (ASIC) and was produced by the Queensland Behavioural Economics Group (QuBE). It sets out the results of research into how behavioural biases may influence preferences towards hybrid securities over the less complex financial products of bonds and shares.

The report provides preliminary insight into the behavioural biases and risk attitudes that influence investment in hybrid securities. The findings are based on a pilot study that was commissioned by ASIC due to its concern that some retail investors may struggle to understand the complexity of hybrid securities and the risks they pose.

A key insight from behavioural economic research is that decisions, including investment decisions, are influenced heavily by a range of cognitive biases rather than solely rational consideration of all options. It follows that regulation aiming to improve citizens' welfare needs to take into account these biases.

The pilot study's objective was to identify the behavioural biases that impact allocation to hybrid securities within an overall investment portfolio and also assess how the perceived risk of hybrid securities compares with shares and bonds. This can inform conversations with industry, assist in the development of regulatory interventions, and contribute to improvements in ASIC's programs to advise and educate investors to make more informed decisions (such as via the MoneySmart programs).

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Grantor

Australian Securities and Investments Commission (ASIC)

Amount

$31,262

Research team
QUT External collaborators

Organisational unit
Lead unit School of Economics and Finance Other units
Start date
11 April 2014
End date
1 August 2014
Research areas
Keywords
behavioural economics, interventions, hybrid securities, behavioural biases, risk attitudes

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