Illuminating the Dark Side of Financial Innovation: The Role of Investor Information

Item Type Monograph (Working Paper)
Abstract

This paper investigates the impact of investor information on financial innovation. We identify specific channels through which issuers of financially engineered products exploit retail investors by using their privileged access to information. Our results imply that imperfect investor information regarding volatility and dividends is crucial to explain the pricing and design of financially engineered products. We confirm our conjecture by exploiting a discontinuity in issuers' informational advantage. The insights are of systemic importance because they suggest that product issuers' behavior in the financial innovation market aggravates investor information problems of the financial system.

Authors Ammann, Manuel; Arnold, Marc & Straumann, Simon
Language English
Keywords Structured Products, Investor Information, Financial Innovation
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area None
Date 10 March 2017
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Number 2017/04
Number of Pages 50
Depositing User Geraldine Frei-Böbel
Date Deposited 27 Mar 2017 13:10
Last Modified 17 Jan 2018 15:27
URI: https://www.alexandria.unisg.ch/publications/250638

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Citation

Ammann, Manuel; Arnold, Marc & Straumann, Simon: Illuminating the Dark Side of Financial Innovation: The Role of Investor Information. School of Finance Working Paper Series, 2017, 2017/04.

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https://www.alexandria.unisg.ch/id/eprint/250638
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