Financial Innovation, Market Participation, and Asset Prices - HAL-SHS - Sciences de l'Homme et de la Société Accéder directement au contenu
Article Dans Une Revue Journal of Financial and Quantitative Analysis Année : 2004

Financial Innovation, Market Participation, and Asset Prices

Résumé

This paper investigates the pricing effects of financial innovation in an economy with endogenous participation and heterogeneous income risks. The introduction of non-redundant assets endogenously modifies the participation set, reduces the covariance between dividends and participants' consumption and thus leads to lower risk premia. In multisector economies, financial innovation spreads across markets through the diversified portfolio of new entrants, and has rich effects on the cross-section of expected returns. The price changes can also lead some investors to leave the markets and give rise to non-degenerate forms of participation turnover. The model is consistent with several features of financial markets over the past few decades: substantial innovation, higher participation, significant turnover in investor composition, improved risk management practices, a slight increase in real interest rates, and a reduction in risk premia.

Domaines

Dates et versions

hal-00478480 , version 1 (30-04-2010)

Identifiants

Citer

Laurent-Emmanuel Calvet, Martin Gonzales-Eiras, Paolo Sodini. Financial Innovation, Market Participation, and Asset Prices. Journal of Financial and Quantitative Analysis, 2004, Vol.39,n°3, pp.431-459. ⟨10.1017/S0022109000003975⟩. ⟨hal-00478480⟩

Collections

HEC
755 Consultations
0 Téléchargements

Altmetric

Partager

Gmail Facebook X LinkedIn More