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The Choice Channel of Financial Innovation / Felipe S. Iachan, Plamen T. Nenov, Alp Simsek.
- Format:
- Book
- Author/Creator:
- Iachan, Felipe S.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w21686.
- NBER working paper series no. w21686
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2015.
- Summary:
- Financial innovation in recent decades has expanded portfolio choice. We investigate how greater choice affects investors' savings and asset returns. We establish a choice channel by which greater portfolio choice increases investors' savings--by enabling them to earn the aggregate risk premium or to take speculative positions. In equilibrium, portfolio customization (access to risky assets beyond the market portfolio) reduces the risk-free rate. Participation (access to the market portfolio) reduces the risk premium but typically increases the risk-free rate. Empirically, stock market participants in the U.S. save more than nonparticipants, and have increasingly dispersed portfolio returns, consistent with the choice channel.
- Notes:
- Print version record
- October 2015.
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