Engineering lemons

Petra Vokata (The Ohio State University)

Recent complex financial products sold to households contradict the basic premise of canonical innovation theories: financial innovation benefits its adopters. In my 2006–2015 sample of over 28,000 yield enhancement products (YEP) the securities offer attractive yields but negative returns. The products lose money both ex ante and ex post due to their embedded fees: on average, YEPs charge 6–7% in annual fees and subsequently lose 6–7% relative to risk-adjusted benchmarks. Simple and cheap combinations of listed options often first-order dominate YEPs. Competition, disclosure, or learning do not eliminate this inferior financial innovation over my sample period

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Year of publication:	[2020]
Authors:	Vokata, Petra
Publisher:	[Columbus, Ohio] : The Ohio State University, Fisher College of Business, Charles A. Dice Center for Research in Financial Economics
Subject:	Household finance \| financial innovation \| hidden costs \| complexity \| structured products \| Finanzprodukt \| Financial product \| Strukturiertes Produkt \| Structured product \| Theorie \| Theory \| Privater Haushalt \| Household

Extent:	1 Online-Ressource (circa 75 Seiten) Illustrationen
Series:	Fisher College of Business working paper series. - Columbus, Ohio : [Verlag nicht ermittelbar], ZDB-ID 2189279-9. - Vol. WP 2020, 021 Fisher College of Business working paper series. - Columbus, Ohio : [Verlag nicht ermittelbar], ZDB-ID 2412551-9. - Vol. WP 2020-03, 021
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	10.2139/ssrn.3223427 [DOI]
Classification:	g4 ; G13 - Contingent Pricing; Futures Pricing ; G14 - Information and Market Efficiency; Event Studies ; G18 - Government Policy and Regulation
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012301434