Stabsseminar ved Paolo Sodini

Paolo Sodini fra Handelshögskolan i Stockholm skal holde foredrag på stabsseminar ved Institutt for foretaksøkonomi fredag.

11.12.2002 - Anette W. Petersen

Tema:Financial Innovation, Market Participation and Asset Prices

Tid:Fredag 13. desember, kl. 12.15-13.30

Sted:Karl Borch's Aud.

Abstract:
This paper investigates the effect of financial innovation in an economy with endogenous participation and heterogeneous income risks. The introduction of non-redundant assets can endogenously modify the participation set, reduce the covariance between dividends and participants' consumption and thus lead to lower risk premia. This mechanism is demonstrated in a tractable exchange economy with a finite number of macroeconomic factors. Agents can freely borrow and lend, but must pay a fixed entry cost to invest in risky assets. Security prices and the participation structure are jointly determined in equilibrium. The model is consistent with several features of financial markets over the past three decades: substantial financial innovation; a sharp increase in investor participation; improved risk management practices; a slight increase in interest rates; and a reduction in risk premia.

Paper er tilgjengelig på instituttets hjemmeside

Kontaktperson: Jørgen Haug (59426).