The choice channel of financial innovation

Resumo

Financial innovation in recent decades has expanded portfolio choice. We investigate how greater choice a¤ects investors.savings and asset returns. We establish a choice channel by which greater portfolio choice increases investors.(nonprecautionary) savings. by enabling them to earn the aggregate risk premium or take speculative positions. In equilibrium, portfolio customization (access to risky assets other than the market portfolio) reduces the risk-free rate, whereas participation reduces the risk premium but typically increases the risk-free rate. Empirically, we show that stock market participants in the U.S. save more than nonparticipants, and have increasingly dispersed portfolio returns, consistent with the choice channel.

Ficha do documento

Tipo

Outro

Ano

2018

Instituição

Fundação Getulio Vargas

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

Identificador

oai:repositorio.fgv.br:10438/27705

Temas

Economia

Palavras-chave

Belief disagreementsSpeculationFinancial innovationSavingsInterest rateRisk premiumCustomizationParticipationFinançasCâmbio a termoRisco (Economia)Taxas de juros