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Journal ArticleDOI

The dark side of financial innovation: A case study of the pricing of a retail financial product

TLDR
This paper found that the offering prices of 64 issues of a popular retail structured equity product were, on average, almost 8% greater than estimates of the products' fair market values obtained using option pricing methods.
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This article is published in Journal of Financial Economics.The article was published on 2011-05-01. It has received 308 citations till now. The article focuses on the topics: Rational pricing & Investment theory.

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Neglected Risks, Financial Innovation, and Financial Fragility

TL;DR: In this article, the authors present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions: first, investors neglect certain unlikely risks.
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Financial Innovation and Endogenous Growth

TL;DR: In this paper, the authors model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the implications for economic growth, and they start with a Schumpeterian endogenous growth model where entrepreneurs earn monopoly profits by inventing better goods and financiers arise to screen entrepreneurs.
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New Evidence on the Financialization of Commodity Markets

TL;DR: The authors examined the impact of investor flows into and out of commodity-linked notes (CLNs) on commodity futures prices and found that non-information based financial investments have important impacts on commodity prices.
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Financial innovation and endogenous growth

TL;DR: In this paper, the authors build a Schumpeterian model in which entrepreneurs earn profits by inventing better goods and profit-maximizing financiers arise to screen entrepreneurs.
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New Evidence on the Financialization of Commodity Markets

TL;DR: The authors examined the impact of investor flows into and out of commodity-linked notes (CLNs) on commodity futures prices and found that non-information-based financial investments have important impacts on commodity prices.
References
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Journal ArticleDOI

The Cross‐Section of Expected Stock Returns

TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
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THE EQUITY PREMIUM A Puzzle

TL;DR: This paper showed that an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return.
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Maps of Bounded Rationality: Psychology for Behavioral Economics

TL;DR: Kahneman as mentioned in this paper made a statement based on worked out together with Shane Federik the quirkiness of human judgment, which was later used in his speech at the Nobel Prize in economics.
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Investor Psychology and Security Market Under- and Overreactions

TL;DR: The authors proposed a theory of securities market under- and overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors' confidence as a function of their investment outcomes.
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Presentation Slides for 'Investor Psychology and Security Market Under and Overreactions'

TL;DR: This paper proposed a theory of securities market under- and overreactions based on two well-known psychological biases: investor overconfidence about the precision of private information; and biased self-attribution, which causes asymmetric shifts in investors' confidence as a function of their investment outcomes.
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