PERSUASION OF INDIVIDUAL INVESTORS BY SCENARIOS

Banks are often accused of biasing their information documents in order to exploit less sophisticated investors. In this paper we analyze the sales prospectus scenarios that banks create to describe their structured financial products to retail investors. Based on a broad data set of prospectuses in U.S. and German markets, we find that, contrary to previous studies of single products, most banks do not bias their scenarios to make their products appear better than they are. In the light of these results, the usefulness of stricter regulation of information documents is questionable.