Financial Innovation and Portfolio Risks
I illustrate the effect of financial innovation on portfolio risks by using an example with risk-sharing needs and belief disagreements. I consider two types of innovation: product innovation, formalized as an expansion of new financial assets; and process innovation, formalized as a reduction in tr...
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| Format: | Article |
| Language: | en_US |
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American Economic Association
2013
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| Online Access: | http://hdl.handle.net/1721.1/82669 https://orcid.org/0000-0003-0840-1848 |
| _version_ | 1811085042259066880 |
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| author | Simsek, Alp |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Simsek, Alp |
| author_sort | Simsek, Alp |
| collection | MIT |
| description | I illustrate the effect of financial innovation on portfolio risks by using an example with risk-sharing needs and belief disagreements. I consider two types of innovation: product innovation, formalized as an expansion of new financial assets; and process innovation, formalized as a reduction in transaction costs. When belief disagreements are large, both types of innovation increase portfolio risks. Moreover, endogenous financial innovation is directed towards speculative assets that increase portfolio risks. |
| first_indexed | 2024-09-23T13:02:00Z |
| format | Article |
| id | mit-1721.1/82669 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T13:02:00Z |
| publishDate | 2013 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/826692022-10-05T04:22:55Z Financial Innovation and Portfolio Risks Simsek, Alp Massachusetts Institute of Technology. Department of Economics Simsek, Alp I illustrate the effect of financial innovation on portfolio risks by using an example with risk-sharing needs and belief disagreements. I consider two types of innovation: product innovation, formalized as an expansion of new financial assets; and process innovation, formalized as a reduction in transaction costs. When belief disagreements are large, both types of innovation increase portfolio risks. Moreover, endogenous financial innovation is directed towards speculative assets that increase portfolio risks. 2013-12-06T18:38:40Z 2013-12-06T18:38:40Z 2013-05 Article http://purl.org/eprint/type/JournalArticle 0002-8282 1944-7981 http://hdl.handle.net/1721.1/82669 Simsek, Alp. “Financial Innovation and Portfolio Risks.” American Economic Review 103, no. 3 (May 2013): 398-401. © 2013 the American Economic Association https://orcid.org/0000-0003-0840-1848 en_US http://dx.doi.org/10.1257/aer.103.3.398 American Economic Review Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association American Economic Association |
| spellingShingle | Simsek, Alp Financial Innovation and Portfolio Risks |
| title | Financial Innovation and Portfolio Risks |
| title_full | Financial Innovation and Portfolio Risks |
| title_fullStr | Financial Innovation and Portfolio Risks |
| title_full_unstemmed | Financial Innovation and Portfolio Risks |
| title_short | Financial Innovation and Portfolio Risks |
| title_sort | financial innovation and portfolio risks |
| url | http://hdl.handle.net/1721.1/82669 https://orcid.org/0000-0003-0840-1848 |
| work_keys_str_mv | AT simsekalp financialinnovationandportfoliorisks |